Now is the Time for Family Enterprises to Innovate


Federal handouts are propping up families and businesses, but that shouldn’t undermine Canadians’ entrepreneurial drive.

Canada’s economy is reopening. What’s next?

Throughout the coronavirus pandemic, the federal government has improvised through a raft of stimulus measures designed to nurse businesses and communities back to health.

For family enterprises, which account for more than half a trillion in GDP, the stakes have rarely been higher. It’s unclear whether emergency wage subsidies and work-sharing programs, measures put in place by Ottawa to prevent layoffs, and promote rehiring, will be enough to kick-start the economy.

On the credit side, the federal government’s Covid-19 economic response plan is granting emergency interest-free loans of up to $40,000 to thousands of small businesses and non-profits to help cushion the blow of declining revenues.

BCAP, Ottawa’s business credit assistance program, goes farther and provides more than $10 billion of additional support to small and medium-sized enterprises with cashflow problems.

Regional Lifelines

Earlier this month Ottawa committed an additional $962 million to small businesses and communities to help them retain their employees, pay rent, and access capital to cover costs.

These latest handouts, targeting six regions through as many regional agencies, bring the federal price tag in support of Canadians and businesses to more than $149 billion.

The Regional Relief and Recovery Fund, as it is called, is devoted to helping manufacturing, technology, tourism, and other sectors key to the regions and local economies.

The relief will come as a boon to small and medium-sized enterprises, especially those in agriculture, where family-owned SMEs in Canada’s prairie provinces account for 80% of all GDP sustained by SME agricultural firms in total.

Many entrepreneurs are still anxious about whether they will get the help they need, says Mélanie Joly, Canada’s economic development minister. “No matter how wide we extend the safety net, businesses across Canada continue to slip through the cracks.”

Indeed they do, to the point that new data from Statistics Canada shows nearly two-million people lost their jobs in April, bringing the national unemployment rate to its second-highest level on record at 13%.

That’s a particularly sobering statistic for family enterprises, which employ 6.9 million Canadians or the equivalent of 47% of all private-sector employment.

As joblessness threatens to rise, so will associated costs. Parliament’s budget watchdog Yves Giroux predicts the federal deficit for the year will hit $252.1 billion as a result of the Covid-19 pandemic, higher if emergency measures remain in place longer than planned.

The ruling Liberals have said that they would spend what was needed in order to bridge businesses and workers through the crisis. For now, that line resonates with the average citizen. Business-owners are more likely to be cautiously optimistic at best.

Canadians want a recovery that builds our resilience for future challenges

Canadians, by a two-to-one margin, want governments to “spend whatever is required” to rebuild and stimulate the economy, even if it means running large deficits, according to a study by the Broadbent Institute.

Part of the reconstruction envisions renewed national capability to produce medical supplies and other key goods domestically, instead of relying on global markets. Rick Smith, the Institute’s executive director, believes Canadians are willing to let their governments spend their way to self-sufficiency.

“Canadians want a recovery that is fair, focused on people, and that builds up our resilience for future challenges,” Smith says. He is not alone in his thinking.

Igniting Innovation

Building up resilience could see a renaissance of innovation. Canada’s Innovation Economy Council, an embryonic coalition of start-ups that hope to shape industrial innovation policy, published their first white paper on how young tech firms can lead the nation’s post-pandemic recovery.

For family enterprises in the throes of innovating through their own start-up initiatives, advanced industries like e-commerce, data privacy technology, and software design create jobs at a faster rate than the overall economy, IEC says.

At Cascades Inc., the Canadian paper products group founded by the Lemaire family, old data has new meaning thanks to Information Builders, a firm that helps businesses integrate, cleanse and analyze data, including data from connected devices. Manufacturing equipment sensors monitor operating conditions to ensure the quality of the group’s finished products, says Martin Gauthier, technology co-ordinator.

“Canada’s economic recovery from Covid-19 will be led by our high growth, tech and innovation companies,” predicts Yung Wu, chief executive of MaRS, a start-up consultancy linked to IEC, which warns that a 25% drop in employment in the technology start-up sector would wipe out 274,000 jobs across Canada. It is pushing Ottawa to implement stimulus measures to enhance the nation’s digital economy.

Yet the vast majority of Canada’s family-owned enterprises operate in traditional areas such as agriculture, food services, and retail and wholesale industries. Redefining their business models and enabling them to pivot in a massive way overnight won’t happen soon.

Reduced dependence on the US, where 80% of Canada’s exports landed from 1995 and 2010 would not be a bad thing either.

Fluid Supply Chains

With the reopening of the Canada-US border on the horizon, the Canadian American Business Council itself issued a statement last week calling for an enhanced and unified manufacturing supply chain between both countries.

The trade group, which represents 27 businesses, says maintaining a fluid border will be key to North America’s economic recovery.

“Nearly two-thirds of Canada’s exports are manufactured goods,” notes Dennis Darby, chief executive of Canadian Manufacturers and Exporters. “More than 80% of these exports go to our CUSMA partners.”

Yet Canada’s family enterprises are not exactly export champs. They may account for 49% of private-sector GDP, but a mere 1.9% were exporters in 2013, according to the Conference Board of Canada.

The federal government is rightly disbursing significant amounts of cash through temporary programs (CERB, CEWS, CEBA) for individuals, employers, and businesses, as well as a number of other liquidity-enhancing measures. But with tax revenues falling sharply, Ottawa’s spending will increase the federal deficit, likely raising it to a stratospheric $250-plus billion this fiscal year.

Will loans and subsidies sap Canadians’ entrepreneurial spirit and their aspirations to be financially independent and resilient? And what will be the long-term cultural effect of millions of Canadians depending on government handouts?

Might we see the introduction of inheritance taxes or new levies on affluent families? The Broadbent Institute’s study suggests Canadian’s are warming to such ideas with 75% of its 2,280 survey respondents strongly in favor of a wealth tax.

If ever there was a time for family enterprises and their next-gens to innovate, this is it.

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