Canadian small business owners show a gritty determination as they manage through the economic downturn and remain upbeat despite feeling the pressure. While most are feeling the stress of the current economic downturn a full 70 per cent say they are confident that their business situation will improve over the next six months. In the meantime they are taking bold and sometimes extraordinary steps like cutting their own salaries to keep afloat.
The American Express Small Business Monitor reveals that business owners are willing to make sacrifices to protect their business, but that even in these turbulent times the vast majority (76 per cent) believe that the rewards and opportunities from running your own business outweigh the risks and challenges.
The survey found that one in four Canadian small business owners have stopped taking a personal salary, and another quarter have invested personal funds in order to continue to support employees during the current economic downturn. Other cost-saving strategies include cutting back on expenses (60 per cent), curbing personal spending (48 per cent), and increasing customer value (46 per cent) to improve cash flow and manage their business during the current downturn.
Keeping with the long-held belief that a business' greatest asset is its employees, the survey's respondents indicated a willingness to make sacrifices to retain talent and keep employees happy, including the continuation of bonuses (30 per cent) and pay raises (28 per cent).
The big difference between now and the last American Express Small Business Monitor in the fall is that at that time most business owners were hoping to ride out the downturn without making many changes to their plans or practices. Now many entrepreneurs report that they have already taken steps to protect their business finances and cut expenses, including:
- Hiring freeze (38 per cent)
- Salary freeze (34 per cent)
- Stopped taking a personal salary (25 per cent)
- Investing personal assets in the business (34 per cent)
- Introduced flexible work hours for employees (26 per cent)
- Reduced employee hours (25 per cent)
- Re-evaluated supplier relationships (29 per cent)
However, the American Express Small Business Monitor shows that relatively few (17 per cent) have resorted to laying off staff, and only eight per cent believe they may have to consider doing so over the next six months. Instead, 28 per cent expect to be hiring over the next six months, even if it's part-time or contract staff.
Despite the economic environment, more than 80 per cent of small business owners are still willing to take a certain degree of business-related risks.
Examples of the sorts of "moderate risks" small business owners are willing to
take include:
- Investment in new equipment or other capital expenditures (52 per cent)
- Use of personal assets to cover costs (32 per cent)
- Use of a line of credit or bank loan to pay creditors (30 per cent)
- Extended payment terms for customers (18 per cent)
- Devotion of additional capital to salaries (15 per cent)
Small business owners say they are also spending more time managing their existing customer relationships and doing more to offer greater value to their customers. Many are rethinking their product offerings and innovating product lines to stay ahead of competitors.
Of course, few are weathering the recession without some battle scars. Two in five (42 per cent) are worried things will get worse for their business before it gets better, and 26 per cent of respondents indicated concerns about meeting payroll. One in 20 are worried about making it through the next six months, saying bankruptcy is a very real possibility.
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