I just read that New Brunswick small and medium sized businesses are the most optimistic in Canada. This is according to the latest CFIB survey of business optimism. The journalist was at a loss to describe why NB SMEs were so optimistic.
I too, am skeptical. If you look at the number of businesses remitting payroll information to CRA (which means they have employees) in New Brunswick, it has actually dropped 2.7% in the past five years. Because 97% of all businesses in New Brunswick have less than 50 employees, it is safe to say that the number of small businesses has dropped by that amount 2.7%. Now, at the same time in the three strongest economies – BC, Alberta and Ontario – the number of firms is up very strongly – in Alberta over 17%!
How does this compare to previous years in New Brunswick? Well, the five years before (1996-2001), the number of firms increased by 4% and the previous five (1991-1996) – including the recession – increased by 2%.
So despite, the small business tax cuts and all the yadda yadda yadda about small businesses, they are still in decline in New Brunswick.
Now the CFIB and the NB Biz Council and the Chamber and just about every lobby group around would say we need to put more focus on small business, more government incentives, more tax breaks, more more more.
But, forgive me for whipping the dead horse here, I think all these groups misunderstand what drives small business growth (yes, I am saying that I am smarter than all those groups – how’s that for a whopper).
Alberta doesn’t do anything special to promote ‘small business’ growth. No special banks, no special programs (except for a few specific sectors). Yet, their small biz growth is through the roof.
Why? Because the vast majority of small businesses (around 97%) generate virtually all their sales from their local market area. So, if you want these businesses to grow, you need to stimulate economic growth at a broader level. Just trying to make it a little easier for small biz in a weak economy, will do very little to support small biz growth.
Take the Miramichi for example. The pulp mill closes. 800 high paying jobs gone. Do you think you will stimulate small biz growth by chopping a few points of the small biz tax rate? That’s just nuts.
There is a highly symbiotic relationship between national and multinational firms that provide economic anchors in our communities and provide the basis for the majority of small business success.
We need to recalibrate our mix of small and big biz in our communities. Yes, it is a shame when a pulp mill closes but if we had five similarly sized employers there – in diverse sectors – would the pain be as great?
Now, you purists would say that the issue is the 2-3%. The small/medium businesses that actually have markets outside New Brunswick. Or the 1%. The small/medium businesses that have markets outside Canada. You will say we need to focus on these Gazelles.
Fair enough. But cutting small biz taxes or doing some of the other things that the CFIB, NB Biz Council, etc. are recommending are not targeted at that group – they are broad-based.
We need to get our mix recalibrated. We need to get our share of foreign (and national) investment. And we need to understand the symbiotic relationship between small and big biz.
Now, back full circle. I think it’s great that New Brunswick’s small businesses are optimistic. But if this leads government and community leaders to slack off when it comes to economic development, that would be a shame.
P.S. – I am just kidding about the ‘smarter’ thing. Cripes, many of these groups have trained economists on the payroll – not to mention the province’s top business minds. I’m just a poor economic development consultant. But when you come at something with a certain paradigm – that framework will pervade your entire approach to things. Would a CFIB economist actually promote strategies to attract big biz to our communities? Not on your life.