A weaker Canadian dollar, lower energy prices and stronger growth in key export markets are creating opportunities for small businesses to reap the benefits of exporting
TORONTO, Oct. 28, 2015 /CNW/ - The time is right for small- and medium-sized enterprises (SMEs) to grow their revenues, and support the Canadian economy, by increasing their exports of goods and services abroad, according to a new RBC Economics report entitled Doors open for Canada's SME exporters. With a weak Canadian dollar relative to the U.S., low energy prices, and a growing U.S. economy, conditions are favourable for SMEs to increase their export presence.
"Over the last decade, a number of factors including the 2008 recession and a strong Canadian dollar led many exporting businesses to shut down or look inward to the domestic market - but the landscape has changed to become more favourable for exporters," says Gerard Walsh, economist, RBC. "Considering the upside potential for business and overall economic growth, there is an opportunity for small- and mid-sized businesses to think beyond Canadian borders again if they aren't already."
Capacity to increase export presence
SMEs account for 25 per cent of Canada's overall merchandise exports and in several industries, including information and cultural services and a number of manufacturing sectors, their share is over 50 per cent. Nevertheless, compared to other advanced economies, the share of overall exports by Canadian SMEs is low, which suggests there is capacity to increase exports amongst these businesses. Canada's 1.1 million SMEs, defined as businesses with fewer than 500 employees, generate approximately 40 per cent of Canada's GDP, and created two-thirds of net new jobs since the recession.
After peaking a decade ago, the number of SME exporters fell by 15 per cent through 2010 and estimates suggest their numbers have not recovered in the years since. Despite their diminished numbers, SME exporters earn higher average revenues and are more likely to be fast growing than their non-exporting counterparts.
"SME exporters tend to be more optimistic about their future growth and more likely to invest than other SMEs," added Walsh. "On average, Canada's small- and mid-sized exporters outspend other SMEs on investments in machinery and equipment, research and development, and new technology."
Golden opportunity to accelerate growth
"This is a golden opportunity for small businesses who want to accelerate their growth," says Sarah Adams, vice-president, Small Business, RBC. "The higher revenues earned by SME exporters should inspire other SMEs to grow faster by expanding exports, and market conditions couldn't make it easier to start now."
Adams has three recommendations for business owners looking to expand through exporting:
- Explore financing from a variety of sources: Thanks to more business-friendly lending policies, fewer SME exporters report financing as a stumbling block to their growth. Business owners who have been holding back on exporting because of financing concerns should inquire about government grants, commercial financing and trade credit from suppliers.
- Tap into government resources: Public-sector institutions like Export Development Canada (EDC) and the Business Development Bank of Canada (BDC) offer education, export incentives and financial services to help businesses expand globally.
- Look for opportunities overseas: The recently concluded Comprehensive Economic and Trade Agreement (CETA) with the European Union - Canada's second-largest trading partner - offers new opportunities to SMEs as tariff and non-tariff barriers come down. Agreements now in place with the United States, Mexico, Peru, Colombia and South Korea, among others, are providing exporters with improved access to international markets. Looking ahead, the Trans-Pacific Partnership may create new opportunities for SME exporters in the Asia-Pacific region.
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