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Investments on hold pending stronger signs of growth, American Express Monitor finds

MARKHAM, ON, March 9 /CNW/ - Canadian small business owners are still waiting for the promised economic recovery to hit their bottom lines and as a result are increasingly reluctant to take risks with their business and their finances.

The quarterly American Express Small Business Monitor conducted by Angus Reid Public Opinion has found that the willingness among Canadian small business to take "significant" or "above average" risks has fallen to 16 per cent from 25 per cent a year ago. Survey respondents said they were less willing to make significant capital investments, dig into lines of credit to pay creditors or extend payment terms to customers than they were just three months ago. Only two per cent of the 568 people surveyed said they were willing to take on "significant" risk.

"Small business owners have been patiently waiting for business to pick up," said Eric Nielsen, Vice President & General Manager, Small Business Services Canada, American Express Canada "but our quarterly monitor suggests that, for many, the reports of recovery and anticipation of a market upswing have yet to fully materialize."

Fewer than half (47%) of respondents categorize themselves as "hopeful" that their financial position will improve, down 8 points over the past year. Instead, small business owners appear to be minding their bottom line and not taking any risks. More than a third said that their single most important priority right now is to maintain their current business, while just 28 per cent have made growth their main priority. Being more innovative was the main priority for 14 per cent. And less than a quarter (23%), have sought new or increased credit in the last six months, suggesting any "Dream Big" plans are on hold.

The long wait for better days has caused some small business owners to question whether it's all worth the effort. While three-quarters of respondents agree that the rewards and opportunities of owning their own business outweigh the risks and challenges, unchanged over the last year, the proportion within that group that "strongly agree" has dropped to 30 per cent from 36 per cent.

More Perception than Fact

Still, the same American Express Canada survey revealed that fewer businesses are experiencing a decline in fortunes - 41 per cent, which is markedly fewer than the 50 per cent who reported a downturn in January 2010.  One-third (32%) reported an improvement, while 28 per cent said their business is experiencing no change.

The Amex Small Business Index, which measures and assigns a letter grade to the confidence, performance and attitudes of small business owners and the environment in which they operate, has remained constant over the last year, and sits at 65 per cent or "C".

"The positive to take from this is that at least most small business owners are feeling that their situation is more stable, even if they are reluctant to make big moves until they actually feel the impact of an economic recovery taking hold," said Amex's Nielsen.

Why Work for a Small Business?  

Amex Small Business Monitor findings may well show that small businesses owners currently favour a wait-and-see attitude, but their conviction that they offer Canadians something unique and important remains firm. Not only do Canadian entrepreneurs feel they can still compete with big business when attracting top talent, they believe they're able to do so because they offer a working environment and a quality of life that larger counterparts can't match.

Four out of five entrepreneurs consider their smaller teams and more collaborative work environments as top selling points when recruiting and retaining employees. They also highlight quality-of-life aspects such as flexible work hours (70%), independence (63%) and work-from-home options (41%) as key advantages.

As one owner of a shipping company said, "We can offer job seekers the opportunity to work on a variety of different project as well as the ability to move up faster in the company, which is very appealing to some people when they compare it with a job at a big multinational corporation."

This sentiment also appears to ring true among potential employees. A third of small business owners surveyed said that their last job opening took less than two weeks to fill, and almost four-out-of-five (78%) say they are confident that they could fill an opening in a "reasonable" amount of time.

Small business owners' ability to recruit and then keep their employees motivated may be key in the coming year, since 76 per cent said they were likely to take on more business in 2011 but only a third (36%) say they plan to hire more people during the year, meaning existing employees may find themselves being asked to work harder.

Employers do recognize that an absence of incentive programs such as stock options (75%) and benefits packages (57%) are drawbacks when recruiting alongside larger business. Nevertheless, some feel the federal government's Pooled Retirement Pension Plan (PRPP) - an initiative that would allow small businesses that otherwise could not afford their own plan to offer a retirement savings to employees - may help address that issue.

• When asked about whether they thought the government's plan for a PRPP would be an effective tool for recruiting and retaining employees, respondents were split - 41 per cent said it would be effective, while 46 per cent said it would not
• Almost 40 per cent said they were "very" or "somewhat" likely to supplement their employees' contributions to the PRPP

"Competing with big business on salaries and other financial benefits is obviously not in the cards for many small business owners," Nielsen said. "But the benefits of working for a small business extend far beyond the quality of life issues that owners are trumpeting. The wide scope of experience you can get working for a small business is something that perhaps owners are underestimating."

About the American Express Small Business Monitor

From January 25 to February 2, 2011, Angus Reid Public Opinion conducted an online survey on behalf of American Express Small Business Services among a randomly selected, representative sample of 568 Canadian small business owners who currently have 2 to 100 employees. The margin of error for the total sample is ± 4.0 per cent, 19 times out of 20. The results have been statistically weighted according to the Statistics Canada Business Register's most current business size and region data to ensure a representative sample of the entire population of small business owners in Canada. Discrepancies in or between totals are due to rounding.

About American Express Small Business Services

American Express Small Business Services (SBS) is dedicated exclusively to the success of small business owners and their companies. SBS supports business owners with exceptional service. With tailored products and services, the team delivers purchasing power, flexibility, control and rewards to help customers run their business. Specifically, business owners can leverage an enhanced set of products, tools, services and savings, including charge and credit cards, robust online account management capabilities and savings on business services from an expanded lineup of partners. To obtain more information about SBS visit www.americanexpress.ca/smallbusiness.

About American Express in Canada

American Express in Canada operates as Amex Bank of Canada and Amex Canada Inc. Both are wholly owned subsidiaries of the New York based American Express Travel Related Services Company, Inc., the largest operating unit of the American Express Company. Amex Bank of Canada is the issuer of American Express Cards in Canada. Amex Canada Inc. operates the Corporate Travel, Travel Services Network and Travellers Cheques divisions in Canada. American Express opened its first offices in Toronto and Hamilton in 1853 and now employs 3,700 Canadians coast-to-coast.