Canadian entrepreneurs impacted by slowdown in growth Businesses to prioritize operational efficiency in 2023

Most Canadian small- and mid-sized enterprises (SMEs) expect an economic downturn in the coming year, according to BDC’s study, “Canadian Entrepreneurs’ Needs and Challenges: 2023 Outlook.”

The study reveals that SMEs are rather pessimistic about the current inflationary environment: most companies (52 per cent) believe that the worst is yet to come. They continue to feel the effects of persistent inflation, supply problems and the war in Ukraine. The slowdown in growth has impacted their planning, and 31 per cent are unprepared for it.

Report highlights

• More than half (52 per cent) of business owners believe the economy will deteriorate in 2023.

• Most businesses plan to limit investments due to economic uncertainty (26 per cent), interest rate hikes (22 per cent) and declining sales (18 per cent).

• Despite rate increases, 45 per cent of SMEs do not fear for their profitability and estimate their sales will be similar to what they were last year (42 per cent). Three-quarters are comfortable with their current level of debt.

Important challenges ahead

The next few months will be difficult for entrepreneurs in Canada, who cite rising costs (47 per cent), the economic slowdown (40 per cent) and internal cost control as the main obstacles to their activities. Over the next 12 months, SMEs still plan to invest and prioritize operational efficiency (38 per cent) over growth projects and debt repayment.

“In 2023, investing to be more efficient will be a way for many businesses to limit their decrease in profitability under current economic conditions,” says Pierre Cléroux, vice president, research and chief economist at BDC.

In 2022, the Bank adopted a renewed strategic vision with an intention to fulfill its role as a development bank even more ambitiously over the next few years, including as a shock absorber during economic downturns. As a result, BDC is creating a series of concrete and innovative measures that will expand the scope of its activities and use its solid financial footing to support more entrepreneurs in their development and growth.

BDC’s study was conducted in November 2022 among 1,500 Canadian small business owners to find out their level of confidence in the economy, their business prospects and their investment plans for the next 12 months.

Jean Philippe Nadeau is a media specialist with BDC. Visit bdc.ca to learn more.