Small Business in Calgary: Challenges and Opportunities
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Small Business in
Calgary: Challenges
and Opportunities
1
Calgary is Canada’s
Small Business Capital
Small to medium sized businesses
(SMEs) are of particular importance
to Calgary’s economy because almost
95 percent of all Calgary businesses
are made up of SMEs . Calgary has
the largest concentration in Canada of
small businesses on a per capita basis
(38.8 per 1,000 population), and is also
the young entrepreneurial capital of
Canada.
Aside from having a large population
of SMEs, Calgary’s micro-enterprises
(1-4 employees), a subset of small
business, are the city’s fastest growing
employment segment at 23.3 percent
over 10 years. In 2011, there were
112, 300 self-employed Calgarians.
Small businesses are important For the past 10 years, Calgary has
to economic development. They maintained its position as the city
are job creators and drivers of our with the second highest total growth
local economy, helping to stimulate in self-employment at a rate of 30.9
economic growth and innovation. percent. While Calgary’s climate for
Small businesses sustain nearly half small business is relatively healthy,
the shortage of skilled labour and the
of all Canadian jobs and 30 percent overall tax burden remain issues for
of our GDP. small business, both of which can affect
Adaptability Small businesses are long-term growth.
flexible to challenges, since they
have small, intimate teams that can What are some common
respond quickly to changes in the challenges of small business?
business environment. A survey conducted by the Chamber
this year identified some of the areas in
Innovation Small businesses can
which small businesses are struggling.
mitigate the risk of stifling innovation The shortage of skilled labour is a major
through bureaucracy and process issue, and some businesses feel obliged
with a less ‘set-in-stone’ structure. to pass on business opportunities
because they are understaffed or may
ower Overhead Operating on a
L lack human resource capacity. Some
smaller scale allows these businesses other areas that were identified as
to reduce costs in areas such as challenging included:
heating, lighting, office space, and
compensation, which also results in Government and taxes
lower costs for clients and stimulates The general cost of conducting
business development. business
Despite these strengths, small Growth-related problems, such
businesses face many challenges that as business sustainability and
can make it difficult to thrive. While expansion, attracting new customers,
Calgary is a leader in entrepreneurship and growth management
and small business ownership, there
are always areas where we can improve.
Ensuring that Calgary’s economy
continues to grow in innovation and
productivity will cement Calgary’s role
as a prominent competitor in the global
marketplace.
2
Staffing The Chamber’s survey revealed that such as British Columbia. Other
the biggest challenge that individual issues include reduced productivity,
businesses and business overall are high turnover, deteriorating customer
facing is finding qualified staff. Calgary service, higher training costs, delayed
is facing a labour shortage with an or cancelled expansion, reduced hours
aging population and decreasing birth of operations, and sudden closure. 71
rates. Alberta’s vacancy rate saw the percent reported working longer hours
biggest increase from 2009 to 2013, when they are unable to hire qualified
far exceeding the national average, staff, and when they were able to hire,
and every other province, in jobs left 68 percent say they were forced to
unfilled (Figure 1). The shortage of choose from poor quality applicants.
skilled labour is a major issue, and
some businesses feel obliged to pass Businesses are forced to cope by
on business opportunities because they hiring candidates that are not fully
are understaffed or may lack human qualified for the position, which means
resource capacity. According to a CFIB increased investment in training costs.
survey, the shortage of qualified labour Some businesses are attempting to get
across Western Canada is severely by through hiring fewer employees, or
impacting the ability of entrepreneurs by increasing the salaries and benefits
and small to medium sized businesses of the good employees they do have in
(SMEs) to be successful. This year, an attempt to retain them.
79 percent of firms in the region
As a result, Alberta is leading the country
experienced difficulty in hiring for
in wage growth with an increase of 16.8
the past three years, and 44 percent
percent since 2009, while the national
expect the hiring process to become
average of wage growth from 2009 to
increasingly difficult.
2013 was 10.7 percent .
My biggest challenge has been staff! The labour shortage is not only
affecting Canadian businesses, but also
Recruiting the right person for the job, our economy as a whole: fifty percent
have ignored new business possibilities
training, and ensuring expectations are because the lack of staff limited their
met. Without the right people in place capacity to take advantage of new
growth opportunities, which could
it’s difficult to grow the business and limit small business growth in Calgary.
take time off. What can be done?
Currently, Western Canada is dependent
-Calgary Chamber Member on overtime and delayed retirement as
a temporary fix to the labour shortage,
Impact on Business Owners but this is not sustainable since
How are business owners reacting to employees cannot work overtime and
this? According to CFIB, one in two delay retirement indefinitely. In order
business owners have raised wages to to address long term labour issues,
help attract and retain labour, while it is necessary to address Calgary’s
also using less traditional tactics such as challenges in affordability and cost of
offering flexibility such as the option to living, as well as Calgary’s ability to tap
work from home and flexible working into underutilized labour pools such as
hours, providing leased vehicles, and new Canadians and Aboriginals.
retention bonuses.
A poll by CFIB identified that the top Immigration
three ways that the labour and skills Within the next five years, 100
shortage has affected their businesses percent of our new labour growth will
are the inability for the owner to take come from new Canadians, making
any time away, poor quality applicants, immigration policies a priority for
and increased labour costs, which business in Calgary. When newcomers
were significantly more amplified in arrive in Canada, they live, work,
the prairies than in other provinces and contribute to cities, and yet the
3
federal government provides most improve retention, businesses hiring
of the support for new Canadians. Aboriginal employees can implement
The municipality should bear greater initiatives such as mentorship
responsibility for integrating new programs or cultural awareness to help
Canadians in the workforce, and make better integrate employees.
efforts to remain an attractive option
for new labour, beyond economic Affordability
opportunities, and strive to become
Calgary has a lack of affordable housing,
more socially and culturally attractive
making it difficult to attract and retain
as well in order to retain new labour.
labour in certain fields, including the
service industry, such as teachers and
It has been hard to find good, effective police. Affordable housing boosts
economic development by equipping
trades. Quality is suffering. the labour force with affordable homes
and increasing their disposable income,
-Calgary Chamber Member meaning households spend less of their
monthly income on housing costs
Aboriginal Engagement and more on goods and services that
Calgary also has a large urban Aboriginal support the local economy. Without
population: our largest untapped source adequate housing, Calgary will not gain
of labour. Every year, 25,000 Aboriginal the labour it needs, and will risk falling
youth in Canada become of age to behind in a global economy.
enter the labour market. This group
is an important resource in solving
the labour shortage, however their
potential is limited by education and
employment issues. While there are
many programs citywide that promote
educational and employment aid,
there is less commitment to addressing
retention of Aboriginal employees. To
Job Vacancy Rate, by Province (2009 and 2013)
7
6.1 2009
6 2013
5.5
5 4.7
4.4
4 4
4
3.5
3.1 3.2 3.1
3 2.9
3 2.8 2.8 2.7
2.5 2.7
2.4
2.2 2.1
2 1.8
1.5
1
0
NL PEI NS NB QC ON MN SK AB BC National
Average
Figure 1 “The State of the Canadian Labour Market,” Department of Finance Canada, 2014.
4Government and Taxes The Chamber survey also revealed that province. From those engagement
Calgarians view government, taxes sessions, survey respondents expressed
and the general cost of conducting how the government could establish
business as other issues affecting a role as an enabler rather than an
Calgary business overall. Competitive enforcer of entrepreneurship, in
tax systems help attract investment order to foster a more collaborative
and economic growth. Tax reform that relationship between government and
acknowledges the role of small business business through providing information
in the health of the Canadian economy on trends in the labour market or
can boost Canadian entrepreneurship. new export markets. Furthermore,
Given the importance of small business financial support for start-up and
to Calgary’s economy, it is important entrepreneurial endeavours will help
that policymakers focus on how accelerate small business in Alberta.
tax systems impact business. In the
Canadian Federation of Independent Alberta’s tax climate for small business
Business’ 2013 report on small business is the most competitive in the country,
provincial tax, Alberta is identified but there are improvements that can
as being the overall most competitive be made in order to maintain our top
province, but does not top the list position. Healthy debate continues
in two categories: corporate income over the small business tax, with
tax and property and capital tax. some advocating for the tax to be
An unregulated and uneven tax rate cut completely in order to broaden
ratio between what businesses pay in the ability for new business and
municipal property taxes and what entrepreneurs to start up. Eliminating
homeowners pay in property taxes the small business tax completely is
has created a gap between the taxes risky, however, and may do more harm
that businesses pay and the services than good for Calgary businesses.
they receive in return; businesses in Instead of removing the tax completely,
Calgary pay 4x more in property tax one report recommends some areas of
than residential properties. In order reform of the tax system to incentivize
to improve competitiveness in these small business growth. The report
categories, the province should reduce, argues that eliminating the tax could
but not eliminate, the small business create a “taxation wall” which could
corporate income tax rate. The City result in businesses actively breaking
should attempt to move away from up into smaller, less-efficient units in
its overreliance on business property order to take advantage of tax benefits,
taxes, while also taking steps to close and encourage individuals to create
the tax rate gap between businesses small corporations to reduce personal
and individuals. tax liabilities, instead of entering
the market with the goal of business
growth. In this sense, eliminating the
At a minimum of $700 per room and small business tax hampers growth.
an average of $1200-$1500 for a room Instead, the report argues for a new
and a kitchen, it is very hard for an average taxation system that encourages growth
through incentivizing initiatives
wage earner to live in the city and especially that increase cash flow, initiatives
such as incentives for investment
for any that have dependents. It creates an in depreciable assets, capital gains
environment incentive for small businesses going
public, and reducing the lock-in effect
of working poor. of capital gains. Essentially, the report
advocates for policies that help small
-Calgary Chamber Member business in overcoming economic
barriers to growth by instituting growth
In November and December of 2013, the incentives.
Government of Alberta engaged with
Currently, Alberta is the only province
small business owners across Alberta,
without an incentive program aimed at
producing a report on how to improve
encouraging private investment in local
the tax climate for businesses in the
5businesses that are in need of capital. As a city struggling to address
The Alberta Economic Development infrastructure deficits and high
Authority issued a report that ranked housing costs, Calgary should call on
Alberta as one of the least competitive its thriving and innovative business
jurisdictions in terms of venture community to help forge new and more
capital investment and non-resource efficient solutions to its challenges by
export growth. In British Columbia, identifying a problem and then turning
the program allowed the average to the business community to craft
company that participated to raise a innovative solutions, allowing more
total of $2.14M of equity investment, small businesses and start-ups to grow.
and for every one dollar of provincial
tax credits issued, recipient companies Consider Barcelona, who has announced
generated $1.98 in provincial taxes. an international call for businesses and
By implementing a venture capital entrepreneurs to propose solutions to
tax credit, investment in Alberta municipal problems such as bicycle
small business would be incentivized, thefts, digitizing museum and archive
which would help address the need for collections, conducting business
economic diversification, which is vital impact studies, monitoring pedestrian
to the long-term stability and growth of flows, and empowering support
the Alberta economy. systems to reduce social isolation.
Any individual or start-up company
Strategic Procurement has a chance at winning the contract
if they provide an innovative solution.
One way that the government can As a city that is almost wholly made
financially support small business up of small business ventures, Calgary
is through strategic procurement. should capitalize on their innovation
for practical municipal solutions, while
I would like to see the government offer at the same time supporting one
of the engines of our
more incentive to enter certain industries, economy.
and more government follow-up to ensure
people are treated well.
-Calgary Chamber Member
6Recommendations Government policies alone cannot solve challenges that small businesses face.
There is a role to play by all Calgarians – citizens, educational institutions, and the
business community. Recommendations include:
Employ strategic procurement methods in order to help small Calgary businesses
secure contracts and market legitimacy, while exploring innovative solutions to
problems such as affordable housing and the labour shortage
Continue to promote entrepreneurship through reducing regulatory burdens on
SMEs and facilitating partnerships between start-ups and established business
ventures
Create a greater ability at the municipal level to support new Canadians by
equipping them with the language and cultural skills necessary to maximize their
participation in the labour force
Prioritize employment and retention of Aboriginal employees through establishing
mentorship programs and intercultural programming
Review the small business tax environment to incorporate additional growth
incentives, where appropriate
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