Economy

Why Canadian small businesses close their doors?

August 7, 2023August 7, 2023 Top Quality Canada Bankruptcy, business closure, canada, canadian economy, economy, inflation, out of business, recession, small business, Small businesses, struggling, Unemployment rate

Recent Canadian economy is developing in the path of small business closures and private delinquencies the trend shows. But wait a minute, from the media we get to hear how great the Canadian economy still is despite all the negative trends and how the inflation is being dealt with in a most positive manner. Is that the case really? Many Canadians including many small business owners know that the reality is way different!

What are the struggles of Canadian businesses?

Operating a business in Canada comes with its own set of unique challenges. Despite the country’s relative stable economy, diverse workforce, and supportive business environment, Canadian businesses encounter various obstacles that demand resourcefulness, adaptability and some difficult choices. In this article, we will shed light on the struggles faced by Canadian businesses and how entrepreneurs tackle these challenges head-on to thrive and survive in a competitive and increasingly difficult landscape.

Geographical Dispersion

Canada’s vast geographical expanse poses a significant challenge for businesses, especially those seeking national reach. With the population spread across different provinces and territories, reaching customers in remote regions can be logistically demanding and cost-intensive. Businesses need to develop efficient distribution networks and employ innovative marketing strategies to overcome this hurdle.

High Taxes and Regulatory Compliance

Canadian businesses grapple with high corporate taxes, especially when compared to other developed countries. Additionally, navigating the complex web of tax regulations and compliance requirements can be a daunting task for entrepreneurs, especially for small and medium-sized enterprises (SMEs). Staying informed and seeking professional guidance are essential to ensure proper tax management and adherence to all regulations.

Rising Operational Costs

When it comes to small business closures, perhaps the biggest denominator is the inflation and rising operational costs. Canadian businesses face rising operational costs, including rent, utilities, and labor expenses. Additionally, businesses in major cities like Toronto and Vancouver grapple with the soaring cost of commercial real estate. Striking a balance between cost management and maintaining quality is a constant juggling act for entrepreneurs. Owning a store front in any urban centre in Canada has multiplied by two digits in the last couple of years. Same as purchasing commercial or residential properties, skyrocketing rents are hurting many small businesses to the extend that many businesses owners decide to close their doors for good.

Just recently, in light of estimated hikes ranging from 10% to 20%, a group that represents Canadian businesses is advocating for rental regulation for commercial properties. The greater Way Alliance is a coalition of Canadian companies that has lately pushed for controls on commercial rent hikes as well as greater workplace practices.

Commercial premises do not have annual rent cap restrictions, but many residential rental units have. According to the Better Ways Alliance, many small businesses must pay hefty hikes while renewing their leases since there are no controls. Many company owners are now more in debt than ever as a result of the pandemic and government closures, and when you add a significant rent increase on top of that, you push them to either find a cheaper choice or, more likely, close.

Same as situation in residential homes, the number of properties being purchased and sold at the moment, is one problem that is contributing to the hikes since new owners want to make the most money possible. Everything in the real estate and rental market has become thing of investment and making money of skyrocketing real estate prices. Homes are not for living any more and store fronts are not for having a store for selling goods and services but for investors to make money of buying, reselling and increasing rent.

As middle class disappears so is money for business survival

Canadian middle class is disappearing before our eyes. The rich is getting richer and the poor are getting poorer, basically! Those who are lucky enough to have inherited money from their family members or lucky enough to be b born in a wealthy families can continue to expand their portfolio by investing into real estate hyper inflation. By doing so, the middle and lower class is kicked out of any real estate purchasing power including increasing struggle with basic human needs which is shelter and other cost of living. If a middle class family needs to pay more on monthly basis for their basic human needs, there is less left over for other expanses such as leisure, vacation, restaurant visits, shopping and many other services. In other words there is less money for businesses to earn. The economy is getting gridlocked. Not the exact information we get to hear and see from media outlets is it?

Every small business will tell you the same story, wether it is a small coffee shop who is pinching pennies to survive, corner store struggling with increased rent cost or clothing boutique selling its last pair of underwear, every small business in Canada is struggling with some sort of issues connected to Canadian economy and enormous operational costs.

Back in 2022 for many owners, it was the year of reckoning, with more than one in six small businesses across the country considered bankruptcy or permanent closure if things go in the right direction. That was 2022, the right direction never came since then!

According to the Office of the Superintendent of Bankruptcy, the number of small business bankruptcies reached a two-year high in March of 2022 with 318 small business insolvencies registered. The CFIB, however, asserted that the numbers do not accurately reflect the entire scope of small company closures nationwide, pointing out that many owners choose to cease operations rather than file for bankruptcy. The numbers for small business closures and bankruptcies during 2023 can only be expected to be higher than previous year.

What can be done to save Canadian economy and Canadian small businesses?

Did you hear the expression “the fish stinks from its head” or “the fish rots from its head down”? Well that can be said for Canadian economy and Canadian small business success. Blame it on the managements! Pandemic restrictions have been passed and introduced top-down, taxes have been increased top-down, housing market has been regulated top-down and so on. If anything, the same management can fix it or leave the podium for a better one to turn the country around! The biggest expanse any small business has is the overhead. The biggest expanse any Canadian family has is the cost of living! Basic human needs have become the biggest expanse due to direct government implementations of rules and restrictions or failure to implement better ones. Is the solution to cripple the Canadian economy by taking money out of Canadian middle class and small businesses? Perhaps, why would otherwise these two back bones of Canadian society be in trouble? Why did housing market literally explode in Canada in the past 5-10 years leaving no room for actually buying homes for living and businesses to sell goods and services? Why did Canadian real estate market become investors playground and manipulation ground? Someone has let that happen or not?

Well if this madness trend could reach this level, so it can be reversed! Tax the investors instead of struggling population, regulate rental prices by putting caps on how much landlords can charge per square footage, make houses for living for first buyers and buyers who currently rent, boost the economy by enabling small businesses to thrive once again, don’t reward big industries as they will move to other countries as soon as they see it fit, release more land for builders (like Canada is overcrowded), invest in rural towns and municipalities and not in big urban centres, encourage and subsidize small businesses in rural areas.

Is this to much to ask? Perhaps if you are politician who receives “lobbying” money for releasing big industry laws that suit the rich instead of looking after population.

Will it change for better? Can Canada go back to it’s 90’s and early 2000’s glory? Perhaps we should not dream to big and be happy to have what we have still, it could become much worse and then what?

As no one has the crystal ball, and not many can predict what is lurking around the corner, what remains is the hope that once again we all could buy ourselves a home to live in and perhaps own a small business where we can thrive and pay good amount of taxes instead of spending it all on rent.