2018
Exclusive insights into the attitudes, perceptions and plans of Ottawa’s business leaders
BUSINESS CONFIDENCE IN THE CAPITAL MARKET OUTLOOK
HIRING INTENTIONS
WORKPLACE TRENDS
MAYOR’S RATING
PLUS: How is the rising minimum wage affecting Ottawa businesses? BROUGHT TO YOU BY
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FOREWORD
Valuable insights into Ottawa’s business community It is hard to believe that we are in our fourth year of the Ottawa Business Growth Survey. We started this initiative with trepidation. We were unsure of how it would be received. We are very excited that it continues to grow and provide valuable insights for local businesses. In order for the survey to continue to be relevant, we rely on the continued support and involvement of the local business community. Each year, the data that is derived from this survey helps shape our future initiatives. The survey itself would not be possible without the input and support of our partners: the Ottawa Business Journal, Ottawa Chamber of Commerce, Abacus Data, RBC, Ottawa Senators and Momentum Law. Thank you for your participation and for providing valuable data that is leveraged by our city, our community initiatives and our businesses.
Micheal Burch FCPA, FCA, CFP Managing partner, Welch LLP WWW.OTTAWABUSINESSSURVEYREPORT.CA
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Shedding light on key business issues The facts speak for themselves: local businesses in Ottawa continue to grow and create wealth in our community. We all know that making business decisions is often difficult, particularly in the absence of good economic and financial data. Taken together, with changing demographics and customer patterns, business owners and managers must rely on critical information in making decisions, more than ever. The current edition of the Ottawa Business Growth Survey again provides the type of analysis that benefits decision-making. 2017 was a big year for Ottawa with the Canada 150 celebrations in our city and across the country. The Ottawa Chamber of Commerce continued to grow as we marked our 160th birthday with a proclamation from the City of Ottawa and Mayor Jim Watson. As we turn to the opportunities and challenges of 2018, we are buoyed by the potential that exists in our community. This includes inaugurating a new light-rail transit system this fall; finalizing plans for the long-awaited redevelopment of LeBreton Flats, which will be the hallmark of a burgeoning upper west side of downtown Ottawa; and the emergence of innovation and entrepreneurship as the centrepieces of our post-secondary educational institutions. Simply put: 2018 will be a critical year in Ottawa’s transformation into a modern G7 capital city that will lead from the front. Vibrant local businesses will work towards inclusive growth in our community, and the Ottawa Chamber of Commerce will continue to work with its members and economic development stakeholders to ensure those businesses continue to create jobs and produce results that will benefit all of our residents, foreign students, investors and visitors. We think you’ll find the results of the 2018 Ottawa Business Growth Survey will help you in your business and assist us in collectively moving closer to a shared vision of a successful Ottawa. Thank you to all those who participated in the survey and to all those who partnered with us to make it a resounding success.
Ian Faris President & CEO Ottawa Chamber of Commerce WELCH LLP/OTTAWA CHAMBER BUSINESS GROWTH SURVEY 2018 3
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Helping the business community thrive On behalf of the entire team at Abacus Data, it’s a pleasure to present the findings of the 2018 Ottawa Business Growth Survey. This year, 755 business leaders from across the National Capital Region completed our survey. The goal of the annual study is to obtain an accurate picture of the current state of our city’s economy through the eyes of business leaders. We seek to understand perceptions and expectations as well as identify areas where collectively all stakeholders can make the business environment stronger to achieve growth. This year we also looked more deeply at how businesses in our community are managing some significant changes in the business environment, including the increase to Ontario’s minimum wage. This initiative is presented by the Ottawa Chamber of Commerce
in partnership with Welch LLP and Ottawa Business Journal. The Ottawa Business Growth Survey is co-presented by RBC, Momentum Law and the Ottawa Senators. The survey was also supported by an amazing group of partners from BIAs across the city, the National Capital Heavy Construction Association, the Ottawa Construction Association, Canadian Federation of Independent Business, BOMA Ottawa, the West Ottawa Board of Trade, the Ottawa Community Loan Foundation, the Canadian Federation of Independent Business, the Family Enterprise Xchange, Ottawa Tourism and Invest Ottawa. Abacus Data, a full-service Canadian polling, public opinion, and market research firm based in Ottawa, carried out the survey from March 11 to April 22, 2018. Respondents were recruited by email and website intercept by the Ottawa Chamber of Commerce, the Ottawa Business Journal and the Welch LLP contact list. Members of BIAs from across Ottawa, the Better
Business Bureau, BOMA, the Ottawa Construction Association and the National Capital Heavy Construction Association were also invited to participate. Thank you to every business leader who took part in our survey. Having such reliable and timely data helps us to understand where the Ottawa business community is and what we have to do to help it thrive in the future.
David Coletto CEO, Abacus Data
CO-PRESENTERS
Audit
Tax
Accounting
Consulting
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9 15 19 23 27 31 35
BUSINESS OUTLOOK: Confidence and hiring plans FINANCIAL PERFORMANCE: Revenues and profit REAL ESTATE: Housing market and workplace trends TOURISM AND HOSPITALITY POLITICS AND PUBLIC POLICY OOKING AHEAD: Exit L strategies and succession planning RESPONDENT PROFILES
Editor’s note: Some results on the following pages may not add up to exactly 100 per cent due to rounding.
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KEY FINDINGS Businesses in the RETAIL AND HOSPITALITY sectors are feeling pessimistic, while tech firms remain highly positive.
Overall BUSINESS CONFIDENCE is down slightly.
More than two in five respondents say their organization plans to RECRUIT NEW EMPLOYEES over the next year.
The COST OF DOING BUSINESS is perceived to be getting worse.
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Nearly one-third of respondents plan to lease or buy BIGGER COMMERCIAL SPACE for their business. WWW.OTTAWABUSINESSSURVEYREPORT.CA
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Local companies are expanding and EXPECTING FUTURE GROWTH.
Attracting new customers and recruiting skilled workers are the MOST IMPORTANT ISSUES facing businesses.
51% of respondents approve of MAYOR JIM WATSON’S PERFORMANCE. 51% of businesses said their NET INCOME was higher last year than in 2016.
The RISING MINIMUM WAGE is having a negative impact on more than two in five local businesses. WWW.OTTAWABUSINESSSURVEYREPORT.CA
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9 BUSINESS OUTLOOK
> Confidence > Hiring intentions > Market expectations > Economic environment > Issues and obstacles
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BUSINESS OUTLOOK
confident capital Business confidence is a key driver of economic growth. Company owners and managers who feel optimistic are more likely to expand their business, hire new staff and make investments that benefit the wider economy. Locally, business confidence remains positive, despite a modest decline from 2017. The Ottawa business confidence index fell to its lowest level in three years, but remains higher than the levels recorded between 2013 and 2015. “The last two years have been quite positive. This is just a softening a little bit,” says David Coletto, the CEO of Abacus Data. The local firm compiled and analyzed the research in the Ottawa Business Growth Survey. This year’s decline was largely driven by weakening confidence in the retail and hospitality sectors that failed to offset a sharp increase among tech firms. Coletto says the softness in retail and hospitality can be explained, in part, by increases in minimum wage. The business confidence index is a composite calculation based on the responses to several of the questions contained on the following pages. The scale ranges from zero to 200, with a score of 100 representing a neutral position. A score higher than 100 is positive, while a score lower than 100 is negative.
business confidence index 150
122
119.2
117
114.2
120
90 FALL 2013
SPRING 2014
SPRING 2015
SPRING 2016
SPRING 2017
SPRING 2018
sector by sector SECTOR
SPRING 2017
SPRING 2018
CHANGE
Consulting
126.8
126.6
-0.2
Technology
130.2
141.6
+11.4
Hospitality
106.8
98.0
-8.8
Construction
124.8
128.8
+4.0
Retail
114.2
103.8
-10.4
Compared to a year ago, has your confidence in the local economy… 2018
19%
2017
58%
2016
17%
FALL 2015
18%
21%
46%
36%
66% 20
Increased
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18%
61%
8% 0
23%
59%
23%
SPRING 2015
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125
124
40
Stayed the same
26% 60
80
100
Decreased
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BUSINESS OUTLOOK
help wanted: hiring intentions Nearly half of all respondents say they plan to recruit new staff over the next year, with less than one in 10 saying they plan to downsize. Respondents from the tech (69 per cent) and construction (47 per cent) were the most likely to say they expect to hire new employees, while nearly one in four respondents from the travel and hospitality industry – which is coming off the Canada 150 celebrations in 2017 – forecast a contraction.
‘AN INCREDIBLE TIME TO COMPETE’
In the next year, do you plan to... 7%
2018
44%
36%
2017
52%
43%
5%
12%
2016
39%
46%
4%
11%
FALL 2015
37%
42%
SPRING 2015
42%
43%
0
20
40
13%
15%
6% 5% 60
10%
80
Recruit new employees
Keep employee levels the same
Reduce employee levels
I don’t know or no comment
100
CASE STUDY
silicon valley optical firm infinera expands kanata footprint A California-based optical networks company flew several of its executives to Canada’s capital in late 2017 to announce an expansion of the firm’s “fastestgrowing” R&D lab and kick off a hiring blitz in Ottawa. Infinera, which creates products to facilitate high-speed transfers of information over optical networks, arrived in Ottawa in 2009 with an initial local workforce of three employees.
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Since then, its presence has grown steadily to some 50 employees – a figure that’s expected to grow higher. Infinera currently occupies 12,549 square feet on the second floor of the Blackwood Business Centre in the Kanata Research Park at 555 Legget Dr. and will be expanding by more than 6,000 square feet on the sixth floor to allow for the extra personnel as well as more lab and R&D space.
“I’ve seen quite a bit of movement in the last 14 months. We saw a crescendo of activity in Bayview Yards. It’s so busy right now. We have so many events happening at Bayview and it’s all different types of sectors, largely tech. We have a lot of activity happening at our site. The climate of tech in Ottawa has never been better. It’s an incredible time to compete and grow and build. How does the year ahead look? Ottawa is wellpositioned to be a strong force. We have to get more companies going global. We’re very well positioned and driving very hard.” MICHAEL TREMBLAY PRESIDENT AND CEO INVEST OTTAWA
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BUSINESS OUTLOOK
cost of doing business jumps The cost of doing business in Canada’s capital has increased over the last year, respondents say. The percentage of respondents who said the situation worsened jumped to 68 per cent this year, up from 48 per cent in 2017. RETAIL OPPORTUNITIES OUTWEIGH CHALLENGES “The year is full of opportunity. It’s been challenging over the last couple years in terms of bankruptcies in big names, such as Sears. It’s a tough sector, but at the same time, we’re seeing some great success stories. Ottawa is the nation’s capital, but many retailers start in Toronto or Vancouver. There are some very interesting conversations happening (as) we’re getting them to look at making Ottawa their next home. We’re also still pounding the pavement in Ottawa, finding the local firms that are looking to grow. We’re looking at the overall shopping experience: amenities, a new focus on food, dining and entertainment. It’s also about … what’s in and around the shopping centre. It’s about getting outside of your comfort zone, doing deals that are unique in how they’re structured. It’s challenging, but there are more opportunities than challenges.” BRIAN O’HOSKI GENERAL MANAGER CF RIDEAU CENTRE
Have the following issues improved, worsened or stayed the same over the past year? Access to capital
5%
50%
14%
Access to skilled workers
5%
48%
34%
Public transit
5%
49%
19%
Transportation in Ottawa/Gatineau
5%
Federal and provincial business taxes Municipal by-laws regulating business activity
2%
Cost of doing business Business licensing/ permitting process at the city
30%
1% 0
27% 18%
45%
49%
2%
12%
33%
37%
3%
15%
21%
28%
63% 44%
20
5% 40%
15% 40
Improved
60
About the same
80
100 Don’t know
Worsened
market outlook More than half of all respondents believe the market for their business will strengthen over the coming year. Respondents from the tech (71 per cent) and construction (56 per cent) sectors were most likely to believe their respective market will improve. Over the next year, do you expect the market for your business sector to... 2018
52%
31%
2017
51%
35%
9% 6%
2016
49%
37%
7% 7%
FALL 2015
45%
34%
0
20 Improve
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45%
31%
40 Stay the same
60 Worsen
10%
12% 80
7%
9% 100
I don’t know or no comment
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BUSINESS OUTLOOK
top issues facing ottawa businesses Attracting new customers and recruiting skilled workers remain the most important issues to respondents. Please rank the most important issues for Ottawa businesses over the coming five years: 2018
FEDS COOL TO CONTRACT BUNDLING
2017
Attracting new customers
56%
Skilled workforce
38%
Changes in technology
32%
Minimum wage increase
31%
Corporate taxes
28%
Attract businesses to ottawa
21%
Access to capital
19% 14%
Changing demographics Municipal taxes
13%
Transportation
10%
External global factors
10%
City hall’s fiscal management
8%
Business permitting/planning
7%
Tourism/visitor attraction
6%
Environmental sustainability
6% 0
2018 10
20
30
40
Attracting new customers
60
82%
Skilled workforce
68%
Attract businesses to ottawa Tourism/visitor attraction
56%
Municipal taxes
56%
Corporate taxes
55%
62%
Access to capital
55%
Transportation
51%
External global factors
50%
City hall’s fiscal management Business permitting/ planning Environmental sustainability
48%
2017
48% 44% 0
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50
20
40
60
80
“Two and a half years after the Liberals’ election, procurement is heavily influenced by three factors. The first is the spectacular failure of key major IT projects (email system, Phoenix pay system, etc.). This has resulted in most senior bureaucrats being cooler to implementing major projects that would result in the bundling of contracts. Second is the union’s push against subcontracting and consultants in the federal government. This government is seen as wanting to be close to unions. This was demonstrated by the prime minister, six days after his swearing in, attending a meeting of the Canadian Labour Congress – something that had not been done in 50 years. Third is a key push by the government to address key issues: gender equality, diversity in procurement, support to Indigenous businesses. The government will claim that the number of contracts awarded to SMEs is growing. But the issue is not the number of contracts, but rather the value of these contracts. Local entrepreneurs want a piece of the pie – but not the crumbs.” SERGE BUY SENIOR PARTNER FLAGSHIP SOLUTIONS
100
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15 FINANCIAL PERFORMANCE
> Revenue > Net income > Access to credit > Raising capital
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FINANCIAL PERFORMANCE
access to credit The ability to access credit has remained relatively stable for most businesses in Ottawa. Compared to a year ago, is credit… CAPITAL ACCESSIBILITY
“Respondents are focusing on bank financing (and) personal lines of credit – what I consider bootstrapping, personal debt and taking on the responsibility of growing your business on your own. We know our clients focus a lot on external sources of investment. So are the respondents not sure how to get a hold of that capital, how to become ready for that sort of investment? The capital is here – it’s available in Ottawa – so perhaps some of the respondents don’t know how to access that and how to have those conversations. It’s important to make sure your growth strategy tries to access the right kind of capital. Having the right advisory team can help ensure you don’t go down the wrong route.” MEGAN CORNELL FOUNDER, CEO AND LAWYER MOMENTUM BUSINESS LAW
2018
13%
42%
2017
11%
48%
2016
12%
51%
FALL 2015
11%
45%
0
6% 5%
35%
5%
32%
5%
20
40
About the same
Harder to access
39%
39% 60
80
Easier to access
100
I don’t know or no comment
capital requirements More than half of respondents say they have enough capital to fund their expansion plans. Do you have the necessary capital required to execute your growth strategy?
2018
58%
26%
16%
2017
58%
23%
19%
2016
58%
25%
17%
0
20 Yes
No
40
60
80
100
Unsure
raising capital YES
Slightly more than one-quarter of respondents say they plan to seek external financing in the coming years.
26% NO
74%
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FINANCIAL PERFORMANCE
funding sources Banks, strategic partners and government grants are the most popular sources of capital. What sources of capital do you plan to access? Banks
GOVERNMENT’S ROLE IN RAISING CAPITAL
48%
Strategic partners
45%
Government grants
40%
Lines of credit
27%
Friends and family
20%
Personal savings
19%
Angel investors
18%
Venture capital
16% 10%
Credit cards None of the above
7% 0
10
20
30
40
50
CASE STUDY
ottawa entrepreneurs champion steady-growth startups with new fund Fed up with the grow-fast-or-perish mantra that has dominated startup communities around the world, two Ottawa entrepreneurs are introducing an alternative funding model to support local “lifestyle businesses” – firms that are growing at a steady clip but won’t yield the exponential returns on investment that venture capital investors are after. Scott Annan and Guido Giordano, the two men behind the Mercury Grove accelerator that spawned Ottawa success stories such as Fullscript, launched Manual Ventures this spring. The fund targets SaaS firms that
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“The importance of continued funding from governments and the private sector is key. The Ontario government recognized this in its 2018 budget when it offered increased SR&ED expenses. The federal government recognized this when it set up the new IDEAS program.” JOSHUA SMITH BUSINESS INCENTIVES LEADER WELCH LLP
already have some monthly recurring revenue under their belts, and ties small loans to that figure. Interest is paid back to investors on a quarterly basis based on how quickly the firm is growing, allowing angels to see a return on their investment without a startup necessarily achieving an exit. Annan says the alternative model addresses a problem he’s seeing in startup communities around the world, Ottawa included: there are a lot of startups out there today, and VCs are only putting money into the ones that are likely to show an exponential return.
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FINANCIAL PERFORMANCE
sales and revenue More than half of respondents say their sales and revenues are increasing. How did your sales and/or revenue change in the last fiscal year?
2018
13%
22%
57%
8%
2017
15%
20%
56%
8%
2016
13%
25%
53%
9%
FALL 2015
15%
24%
48%
13%
SPRING 2015
12%
26%
55%
6%
0
20
40
Stayed the same
Decreased
60
Increased
80
100
I don’t know or no comment
net income Slightly more than half of all respondents say their profits increased last year. How does your net income for 2017 compare to your net income for 2016?
2018
51%
17%
20%
2017
48%
20%
16%
2016
48%
17%
20%
51%
18%
22%
SPRING 2015 0
20 Higher
40 Lower
60 No change
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80
12%
15%
16%
8%
100
I don’t know or no comment
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19 REAL ESTATE
> Housing market > Commercial property > Workplace trends
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REAL ESTATE
homebuying intentions Downsizing is the most popular option among those respondents who plan to buy a home in the coming years. In the next five years, will you be looking to… HOUSING MARKET FACING UNDERSUPPLY
“We’re seeing an undersupply of singlefamily homes, semis and townhomes. The condo market is well-served and we have a considerable amount of new construction. But there’s undersupply of every other type of home. The other big thing that’s happening is a construction boom (in Ottawa’s outskirts) because there is development land outside the city limits. It isn’t a bad commute and most of those communities are adding bus schedules. That’s what’s making Ottawa’s real estate market different from Toronto and Vancouver. We have a relief valve 20 kilometres in any given direction. (Those cities) don’t have the kind of relief that we have to answer the supply problem.”
Stay put
62%
20 Downsize to a smaller home or condo
18%
20
Upgrade to a larger home
11%
20 Enter the housing market with a firsttime home purchase
5%
Sell and enter the rental market
3% 0
10
20
30
40
50
60
70
home prices: ottawa’s competitive advantage? Three in five respondents say Ottawa’s relatively low housing prices help local firms attract employees. Ottawa has lower home prices than Toronto. What impact does this have on your ability to attract and retain employees? Very helpful
17% 43%
Somewhat helpful Will have no impact
34% 7%
Don’t know 0
10
20
30
40
50
RALPH SHAW PRESIDENT OTTAWA REAL ESTATE BOARD
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REAL ESTATE
workplace trends One-third of respondents own their commercial space. Among those who lease, medium-term tenancies of between three and nine years are most common. Do you own or lease the building from which you operate your business?
2018
33%
13%
2017
32%
15%
2016
36% 0
30%
19%
20 Own
31%
40
Long-term lease (10+ years)
11%
12%
11%
29% 60
Short-term lease (under 3 years)
12%
8% 80
8% 100
Medium-term lease (3 to 9 years)
All our staff work from home
working from home Telecommuting continues to grow in popularity, with one in five respondents reporting that employees are spending more time working from home. Compared to this time last year, are your staff spending…
20%
More time working from home
32% 2%
Less time working from home About the same as last year Not applicable
45%
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HOMEBUILDERS BUSY AMID PENT-UP DEMAND “It’s been a wonderful year for home sales in 2017. 2018 is fantastic if you’re in the home construction business and even better for subtrading. It’s exciting to sell as many homes as we can. The challenge is managing the availability of subtrading for homes. It’s a good problem to have. The year continues to be very busy. Sales continue to be high, above average for the past few years. The residential construction industry will continue to have a very busy year with pent-up demand. There’s nothing immediately challenging but there is no shortage of people who need a house. The home building association and members continue to align themselves with Algonquin College, encouraging many interested young people to join the trades. We’re strongly encouraging people, especially young people, to take a career in the subtrades seriously.” JOSH KARDISH VICE-PRESIDENT EQ HOMES
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REAL ESTATE
office expansions Nearly one-third of respondents say they’ll need a bigger space for their business in the coming years.
COMMERCIAL REAL ESTATE MARKET ‘FIRING ON ALL CYLINDERS’
“We are seeing fundamental strength in both the office and industrial markets, as well as strong demand on the investment front in Ottawa. All three of those are firing on all cylinders. Vacancy rates are declining, demand is increasing and we are feeling optimism in the office and industrial communities. If you compare to three years ago, it seems that conversations regarding the federal government and the worrisome tones have moved aside. Everything is geared towards people and there’s a humanistic quality that’s coming into real estate. Environmental sustainability, open-concept design, flexibility, working from home – all of these things have been facilitated with technology. It represents businesses looking after its most precious and expensive asset: people. What I’m seeing for the year ahead, in one word, is growth. The private sector will continue to grow in 2018 and occupy more space than it did at the beginning of the year.” SHAWN HAMILTON SENIOR VICE-PRESIDENT AND MANAGING DIRECTOR CBRE
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Thinking about your organization’s space, over the next five years do you plan to…
Increase its physical footprint by moving to a larger space or expanding
31%
Downsize its physical size 8%
Stay the same
62%
0
10
20
30
40
50
60
70
CASE STUDY
telesat moving downtown with new place bell lease As Telesat prepares to turn 50 next year, the satellite technologies firm is preparing to move from its east-end campus to two floors inside the office tower at 160 Elgin St. as part of a bid to attract new talent. Within the next year, Telesat will move into the 20th and 21st floors of H&R REIT’s Place Bell building in a multi-year lease amounting to roughly 76,000 square feet of space. The shift downtown will take Telesat out of Telesat Court, the eponymous Gloucester street that the firm has called home for nearly three decades. With Telesat’s age comes an impending wave of retirements. CEO Dan Goldberg says many of the company’s long-standing employees are reaching the end of their careers, and the firm must attract young talent to fill those roles and more as the 240-person firm continues to grow. “A lot of the prospective hires would prefer to be downtown,” he says.
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23 TOURISM AND HOSPITALITY
> Meetings and conventions > Corporate entertainment spending
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TOURISM & HOSPITALITY
hosting conferences Nearly one-quarter of respondents say they plan to host a national or international conference.
OTTAWA’S POPULARITY GROWS AMONG TOURISTS “It’s a very interesting and unique time coming off what was such a special year in 2017. It was a record year for tourism in Ottawa. We spent a good portion of 2017 not just living in the moment, but trying to take advantage of the attention on Ottawa for future growth in years to come. 2018 is the first test of how well we did with that. We had an opportunity with more people here to have a really positive experience in Ottawa, an opportunity to engage with people and help them tell their stories about their experiences in Ottawa. So far in 2018, it’s good news. We won’t have the same big events as in 2017, but we are seeing very positive signs that the work the community put in in 2017 is paying positive dividenda beyond the year 2017. We’re optimistic that the outside view of Ottawa has really changed and Ottawa is becoming more and more of a popular destination, both domestically and internationally.” MICHAEL CROCKATT PRESIDENT AND CEO OTTAWA TOURISM
Many of Ottawa’s business leaders, academics and professionals contribute to tourism economic growth by hosting national and/ or international meetings and conventions in Ottawa. Is your organization in a position to do the same? 5% 18%
No
77%
We are planning for one in the future
CASE STUDY
ottawa tourism offers tour operators incentives to court chinese visitors Ottawa Tourism believes a new incentive program will help bring more Chinese tourists to the National Capital Region, and it’s preparing local businesses to capitalize on the incoming opportunities. The initiative coincides with CanadaChina Year of Tourism 2018, a joint program from the Canadian and Chinese governments encouraging travel between the two nations. More than 650,000 Chinese visitors came to Canada in 2017, according to Statistics Canada, a number expected to rise in the coming years as Chinese nationals increasingly turn to travel. The federal government has taken steps to encourage China’s travellers to
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Yes
consider Canada, opening seven new visa centres in the country. Though comprehensive data is hard to come by, the latest analysis from Ottawa Tourism estimates that 41,000 Chinese visitors came through Ottawa last year. Here’s how Ottawa Tourism’s new program works: If Chinese inbound tour operators register for the incentive program by the end of next month, they’ll receive a financial bonus for any extra room bookings they bring to the city. Existing operators earn the incentive for increasing their 2018 numbers over last year, while new operators would be rewarded for bringing any activity to the city.
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TOURISM & HOSPITALITY
corporate hospitality roi Respondents say they get the biggest return on their corporate hospitality spending from giving thank-you gestures to clients and perks to staff. How would you rank the following in terms of ROI on spending from your corporate hospitality or employee engagement budgets: Thank-you gestures to clients Perks for staff
16%
11%
41%
Charitable engagement
13%
32%
Entertaining prospects
8%
29% 3%
20
17%
21%
28%
19%
8% 32%
31%
0
23% 3%
41%
40
24%
5% 60
80
Excellent
Very good
Poor
N/A
100 Neutral
corporate hospitality spending Restaurant meals and staff parties are the most popular forms of corporate hospitality spending among respondents. In which of the following areas does your company spend money on entertaining clients, staff and community members to support sales or community engagement? Sports and entertainment
32% 66%
Restaurant meals 24%
Cocktail events Corporate retreats
16%
EMPLOYEE ENGAGEMENT “One of the interesting trends over the past few years is the shift towards using corporate hospitality budgets for staff perks or rewards that improve employee engagement and company culture. Entertainment is being used as a method of recruiting and retaining top talent. Employees see companies that are investing in these areas as desirable places to work. We are also seeing that companies are looking for more flexibility and the ability to customize to their own needs. The Ottawa Senators have adjusted our product set to reflect that, as well as our go-to-market strategy to respond to that desire for customization and flexibility. We’ve introduced new products such as Club Bell and our newly renovated Alumni Lounge that will be ready next season, offering all-inclusive meals plus a high-end experience.”
55%
Staff parties Other professional entertainment
GEOFF ROSS DIRECTOR OF TICKET SALES AND SERVICE OTTAWA SENATORS HOCKEY CLUB & CANADIAN TIRE CENTRE
22%
In-office amenities, such as food, drink and games
52% 0
10
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30
40
50
60
70
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Ottawa Chamber AD - Full page.qxp_Layout 1 2018-05-11 2:17 PM Page 1
Join the largest, most influential voice for business in Ottawa
Last year, 7,400+ guests attended one or more events (48 events total) 63 members/5 committees dedicated 961 person-hours to advocacy We’ve grown to 700+ members representing 27,000+ employees
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POLITICS AND PUBLIC POLICY > Approval ratings of Mayor Jim Watson and city council > Impact of minimum wage increases > Advocating for change
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POLITICS & PUBLIC POLICY
jim watson retains business community’s support While support for Mayor Jim Watson has softened slightly over the past year, a slight majority of respondents say they approve of his job performance. WATSON SUSTAINS POPULARITY “The mayor is heading into his third (consecutive municipal) election, asking voters to give him another (mandate). It’s clear he remains quite popular with business leaders. His approval rating is down slightly, but is back to where it was in 2016. For a mayor who’s been in office for eight years, those are exceedingly good numbers. The challenges reported by the business community include getting things done at City Hall, which they perceive can be slow. But they still view the mayor as doing a good job. There doesn’t appear to be any spike in disapproval, despite some challenges the mayor has faced such as the delay in opening the light-rail line. Usually, (the status quo) isn’t an interesting story, but in this case, it’s (interesting). Watson has been a fixture in Ottawa politics for a long time. Perhaps it’s because there is no alternative, no clear contenders to challenge him in this fall’s election. But regardless, when you ask most business leaders, he remains popular.”
Overall, do you approve or disapprove of the job each of the following is doing at the City of Ottawa? 14%
Mayor Jim Watson
3%
City Council
0
37%
Disapprove
40%
20
40
6%
16% 5%
8%
13% 5%
9%
60
Approve
Strongly approve
80
100
Neither approve or disapprove
Strongly disapprove
Unsure
business property tax reduction tops priorities Lowering business property taxes is the most important measure that the government can take to improve the local business climate, respondents say. What would you like to see from government to minimize the important issues you’ve identified? Streamline permit process
17%
Reduce development charges
14%
Implement smart cities initiatives Host more major events, such as turning some Canada 150 celebrations into annual festivities Reduce business property tax Reduce government spending Improve/invest in capital infrastructure projects
28%
40% 38% 38% 16%
Streamline hiring of immigrant talent
16% 10%
None of these 0
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H
23%
Improve safety/security of our city
DAVID COLETTO CEO ABACUS DATA
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31%
4% 26%
City of Ottawa staff
12% 5%
26%
37%
5
10
15
20
25
30
35
40
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POLITICS & PUBLIC POLICY
impact of minimum wage in ottawa More than two in five respondents say the increase in Ontario’s minimum wage will have a negative impact on their business. To what extent will the increase in the provincial minimum wage affect your business? RETAILERS ‘HOLDING THEIR BREATH’ Very positive impact
28%
Mostly positive impact
15%
No impact either way
1% 5%
Mostly negative impact
50%
Very negative impact
impact of minimum wage on specific industries Employers in the hospitality, tourism and retail sectors were the most likely to say that increases in the minimum wage will have a negative impact on their business. To what extent will the increase in the provincial minimum wage affect your business? 4%
Retail Technology
23%
7%
38% 68%
1%
Hospitality/Travel
1% 3%
Consulting
1% 3%
Construction
22%
35%
17%
20% 40%
49% 20
40
9%
44%
67%
2% 0
28%
60
9% 9%
80
Very positive impact
Mostly positive impact
No impact either way
Mostly negative impact
100
“It’s a tough time for small retailers in Ottawa. The main street retailers are holding their breath to see how the new minimum wage and labour laws will affect them and by how much. This is a time of uncertainty. Long-term, we’re optimistic, but right now we’re trying to absorb these cost structures and continue to run our businesses. There’s immediate concern, but long-term optimism. The older existing businesses are concerned, while the young millennials opening up businesses are very optimistic. We’re in a time of generational change with new business models, new approaches, new offerings. We’re excited about our prospects on Preston Street as the area densifies and we’re looking forward to new clientele coming to live in the neighbourhood to encourage new retail in the area to meet their needs.” LORI MELLOR EXECUTIVE DIRECTOR PRESTON STREET BIA
Very negative impact
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POLITICS & PUBLIC POLICY
reacting to a higher minimum wage Raising prices and introducing more automation are the two most common measures respondents say they plan to take in response to higher hourly labour costs. How likely are you to do the following as a result of the increase in the provincial minimum wage?
Cut margins Reduce operating hours
11%
8%
Look for ways to introduce more automation Reduce employee benefits
14%
21%
Raise prices
10% 16% 7%
14% 7%
0
14%
6%
8% 15%
7%
20
21%
27%
36%
27%
17%
49% 21%
34%
29%
40
30%
50%
60
Certain to
Likely to
Likely not to
Certain not to
80
100
Probably will
CASE STUDY
ottawa restaurateurs hiking prices, working more to offset minimum wage hike: study Two months after Ontario’s first of two planned minimum wage hikes, Ottawa restaurant owners said they’re coping by cutting down hourly workers’ shifts and passing the extra costs on to the customer, according to a local study. Ottawa-based Archan Consulting surveyed three dozen local restaurant owners in Canada’s capital to gauge how they’ve adapted to meet the demands of Ontario’s rising general minimum wage, which rose to $14 from $11.60 at the start of the year and is slated to increase by another dollar in
2019. Archan said the number of respondents represents roughly 12 per cent of locallyowned and independent restaurants in Ottawa. Some 89 per cent of those surveyed said they raised menu prices to offset the higher wages. Fourteen per cent said they had laid off staff, and 42 per cent reduced new hires. One in ten say they’ve reduced workers’ benefits, a move that attracted harsh public response towards businesses including Tim Hortons franchises in Cobourg and Whitby, east of Toronto.
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The minimum wage increase also appears to be changing who’s doing the work at restaurants. Nearly two-thirds of those surveyed reported they’d reduced shifts for hourly workers – often students or those just entering the service industry. In their place, salaried workers and owners themselves are taking on more work: 28 per cent of respondents said they’d increased shifts for the former group and 61 per cent said they were doing more themselves, in some cases working up to 80 hours a week.
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31 LOOKING AHEAD
> Exit strategies > Succession planning > Legal issues > Sustainability practices
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LOOKING AHEAD
planning an exit Nearly half of all respondents say they are not thinking about stepping aside. Those who are thinking about an exit are roughly evenly divided on when they plan to move on. STARTING TO PLAN “Unless you formally document something in a plan, it is really hard to have a vision of what a good exit looks like. Unless you have a documented plan, it is hard to assess all that needs to be done and the amount of time that’s needed. And it’s really hard to gauge all the emotional things that you need to consider as a business owner. The most important first step a business owner can take is simply documenting the plan itself and thinking holistically about all that has to happen. It’s important to bring tax, insurance and banking considerations together and thought through in a formal written plan. You don’t have to be close to retirement to make the whole succession discussion start. What you have to do is involve the right people and enough people that can look at both the individual and business needs.”
When do you plan on exiting your business?
8% 11%
28%
3-5 years 6-10 years 11-15 years
18%
15+ years Not applicable/unsure 18%
Not planning to exit 9%
7%
succession planning The overwhelming majority of respondents do not have a formally documented succession plan. Do you have a succession plan or exit strategy in place? 11%
2018
50%
2017 11% 0
24%
32% 20
40
Yes, it is well documented
ANDREW ARNOTT REGIONAL VICE-PRESIDENT OF BUSINESS FINANCIAL SERVICES RBC
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<3 years
No
60
26%
19%
15%
9%
80
4%
100
Yes, it is informal at this stage
Not even thinking about it
Not applicable/unsure
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LOOKING AHEAD
exit scenarios An external sale is the most popular option for respondents thinking about an exit. Which of the following exit scenarios are you likely to pursue? MAXIMIZING VALUE 2018
37%
2017
24%
0
8%
11%
17%
20 External sale
16%
15%
7%
40
1%
24%
60
Sale to family member
Winding down the company
1% 16%
IPO
7%
16%
80
100
Sale to your management team Unsure
Other
CASE STUDY
triple merger accelerates thinkwrap commerce’s growth plans Thinkwrap Commerce is joining forces with two other firms to form a single commerce services company, letting the Ottawa-based firm focus on developing new technology. The triple merger was orchestrated by Toronto’s Tenzing and includes Redmond, Washington-based Spark::red. Both are managed hosting providers for clients using Oracle or SAP Hybris commerce platforms. Thinkwrap, previously named one of OBJ’s fastest growing firms and a mainstay on the Branham300 list of Canada’s top ICT companies, represents the software component of the new combined entity. CEO Steve Byrne, who will remain in charge of the Thinkwrap side of things,
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“A competitive process with thirdparty buyers can result in a higher valuation. However, a management buyout can be an attractive alternative, if done right.” STEPHAN MAY MANAGING DIRECTOR WELCHGROUP CONSULTING
says the merger allows the company to “think bigger.” The combined company will see its revenue base tripled – now well into eightfigures – with some-215 total employees spread across every inhabited continent in the world. Byrne says this isn’t the first time Thinkwrap has been approached for M&A opportunities, but a critical factor has always been maintaining the company’s culture. “One of the things that we did not want was for this company to disappear into some massive, larger version of ourselves,” he says. “We wanted all of that to persist. What we built in Ottawa, we’re really proud of.”
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LOOKING AHEAD
legal issues Data breaches and litigation are the most commonly cited legal concerns among respondents.
TOURISM SECTOR CARRIES FORWARD 2017 MOMENTUM “There was risk of a hangover effect after the success of 2017, but it hasn’t materialized. This year has been as strong as last year and ... there’s no reason not to be optimistic after the first quarter. The one thing we can point to is meetings and conventions. We had a record year in 2017 and we don’t have as much business in the books for 2018, but that was to be expected. We knew that a lot of industries going through their rotation cycles were looking at Ottawa in 2017, so we’ve got work to do to replace those large conventions, but we’re doing that and are actively pursuing more business out of the U.K. and the U.S. Our dollar is favourable for international travel. The climate in the U.S. is also perhaps not as welcoming as in the past, so Canada can benefit from that. We’re in a good place. I think the whole country has seen a bump in 2017 during the anniversary year and there’s no reason to not expect us to continue to grow.”
Which legal issues related to your business keep you up at night? Lack of proper employment agreements Data breaches / ransomware
15%
Litigation – risk of being sued or the time and expense of lodging a claim against another party
13%
Poor or inefficient business structure
10%
Lack of a proper agreement between shareholders/partners
5% 7%
Unprotected intellectual property
13%
Other None of these
53% 0
10
20
30
40
50
60
sustainability Economic challenges and a lack of incentives were the most commonly cited barriers to businesses becoming more sustainable. Which are the barriers facing Ottawa businesses from becoming more sustainable in their practices? Please rank the following in order of importance. Challenging economic times & conflicting internal priorities
38%
No incentives - no market pressure from customers, competitors or corporate peers Lack of skills and knowledge of how to implement practices that would lead my company to be more sustainable No clear business case to do so
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25%
19%
23%
20%
10% 9%
0
17%
23%
18%
16%
Insufficient direction from the City of Ottawa
STEVE BALL PRESIDENT OTTAWA GATINEAU HOTEL ASSOCIATION
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7%
15%
20 1
19%
28%
20%
24%
21%
10%
20%
45%
60 2
10%
15%
23%
20%
40
13%
3
80 4
100 5
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PROFILES OF SURVEY RESPONDENTS
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SURVEY RESPONDENTS
breakdown of survey respondents Some 755 business leaders completed the 2018 Ottawa Business Growth Survey. Hereâ&#x20AC;&#x2122;s a closer look at their roles and companies: What is your position in the business? President/CEO and Owner
53%
President/CEO (non-owner)
3%
Partner
9% 5%
Vice President
7%
Vice President/Director
13%
Manager Other
10%
0
10
20
30
40
50
60
company size How many employees does your organization have?
14%
Owner/Operator 1-5 employees
24%
6-10 employees
14%
11-20 employees
13%
21-50 employees
12%
51-75 employees
6%
76-149 employees
5%
150+ employees
12% 0
5
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10
15
20
25
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SURVEY RESPONDENTS
industry sector Which industry does your organization operate in? Retail
10%
Consulting
9%
Technology
9%
Hospitality
8%
Construction
6%
Healthcare
6%
Real Estate
5%
Not-for-profit / Association
5%
Banking and Finance
4%
Legal
3%
Accounting
3%
Education
3%
Communications
3%
Manufacturing
3%
Employment
2%
Arts
2%
Travel
2%
Energy
1%
Aerospace
0%
Other
18% 0
5
10
15
20
head office location What best describes the company you work for?
Locally based company (HQ is in the National Capital Region)
5% 2%
12%
Regional office of a Candian company (HQ is elswhere in Canada) Regional office of an American company Other
80%
Regional office of a European compnay Regional office of an Asian-Pacific company
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INDEX
ottawa business growth survey questions at a glance BUSINESS OUTLOOK Compared to a year ago, has your confidence in the local economy improved, worsened or stayed the same? In the next year, do you plan to hire more employees, keep your staff numbers stable or reduce your headcount? Have the following business issues improved, worsened or stayed the same over the past year? Over the next year, do you expect the market for your business sector to improve, worsen or stay the same? What are the most important issues for Ottawa businesses over the coming five years?
10 11 12 12 13
FINANCIAL PERFORMANCE Compared to a year, is credit harder, easier or the same to access? Do you have the necessary capital required to execute your growth strategy? Are you planning on raising capital in the near future? What sources of capital do you plan to access? How did your sales and/or revenue change in the last fiscal year? How does your net income for 2017 compare to your net income for 2016?
16 16 16 17 18 18
REAL ESTATE Thinking about the residential real estate market, in the next five years will you be looking to upgrade, downsize, make your first home purchase or sell and start renting? Ottawa has lower home prices than Toronto. What impact does this have on your ability to attract and retain employees? Do you own or lease the building from which you operate your business? Are your staff spending more or less time working from home? Thinking about your organizationâ&#x20AC;&#x2122;s space, over the next five years do you plan to expand, downsize or stay put?
20 20 21 21 22
TOURISM AND HOSPITALITY Is your organization in a position to host national and/or international meetings and conventions in Ottawa? Rank the uses of corporate hospitality or employee engagement budgets by ROI In which areas does your company spend money on entertaining clients, staff and community members to support sales or community engagement?
24 25 25
POLITICS AND PUBLIC POLICY Do you approve or disapprove of the job the mayor, city council and municipal staff are doing? What would you like to see from government to minimize the issues facing businesses? To what extent will the increase in the provincial minimum wage affect your business? How will your business respond to the increase in the provincial minimum wage?
28 28 29 30
EXIT STRATEGIES AND SUCCESSION PLANNING When do you plan on exiting your business? Do you have a succession plan or exit strategy in place? Which exit scenarios are you likely to pursue? Which legal issues related to your business keep you up at night? What are the barriers facing Ottawa businesses from becoming more sustainable in their practices?
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32 32 33 34 34
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