Small businesses face challenges in 2008

Small businesses in Canada should enjoy a positive business environment in 2008 but next year won’t be without its challenges, warns a recent report from TD Economics.

The report entitled, “Small Businesses to Benefit from Solid Domestic Demand, but Challenges Call for Innovative Thinking,” reviews the outlook for five key external factors impacting the health of Canadian small business: the prospects for sales, competition, labour markets, non-labour costs and the climate for investment. The report was written by Craig Alexander, vice president and deputy chief economist, TD Bank Financial Group.

“The overall assessment is that 2008 should be a decent year for small business, but significant challenges will be present,” says Alexander. “Small business owners cannot be complacent and must be innovative in developing strategies to address the challenges.”

According to the report, small businesses that are domestically focused will benefit from the strong dollar or are exporting overseas are expected to post solid sales growth in 2008.

“The majority of small businesses in Canada are oriented towards selling to the domestic market and the outlook is for healthy domestic demand growth next year,” says Alexander.

On the other hand, exporters to the United States as well as firms that are part of a supply chain of companies that have a U.S. export focus, and those that are adversely affected by a strong currency will face a more difficult sales environment, the report states.

The report notes that small businesses that export overseas will face a somewhat better environment, since the appreciation in the Canadian dollar has been less dramatic and global demand is expected to remain strong.

“However, the sales prospects do not tell the full story, as all small enterprises should be prepared to deal with a number of key challenges,” cautions Alexander.

Those challenges include fierce competition in both local and foreign markets; tight labour markets in urban centres across the country; and elevated energy and non-labour costs.

Competitive pressures, the report states, will not abate. “Businesses will have limited pricing power, and Canadian consumers are likely to put greater pressure on firms to pass along savings from the appreciation in the Canadian dollar.”

According to the report, the strong Canadian dollar has also made imports more competitive in domestic markets and import competition from low-cost labour centres, like China and India, will continue to increase. At the same time, the report points out that globalization is creating competitive pressures in areas that had previously been insulated such as many service industries.

“This is not the time for small business owners to be complacent-they must strive to move up the value added chain by producing more sophisticated goods and services. Product differentiation and the customer experience are becoming ever more important. Identifying niche markets or underserviced areas can also provide good opportunities, and branding has grown to be critical in attracting business,” says Alexander.

Because labour markets are expected to remain extremely tight, the report recommends that small businesses must develop strategies to attract and retrain high skilled employees.

The report also notes that in the future small businesses must be prepared to hire younger staff and provide training to enable workers to meet the needs of the business.

The TD Economics report anticipates that energy costs will remain high in 2008. Likewise, material costs are expected to remain at relatively high levels. “In many cases there is little that small businesses can do about high input and material costs, as they are price takers and lack much bargaining power with suppliers. Nevertheless businesses should search high and low for methods to reduce non-labour costs,” Alexander says.

According to the report, investing in new technologies is a strategy that for many small businesses might lower costs in the future and boost efficiency. “The future is in selling higher quality or more advanced products, exploiting niche markets and ensuring customer satisfaction.”

Adds Alexander, “The bottom line is that creative thinking and flexibility towards new approaches, processes and strategies are called for.”

Jerry Cook
Editor, MPP
jcook@clbmedia.ca

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CMTS 2007 busy, successful

Haas Factory Outlet, a division of Sirco Machinery Co. Ltd. displayed the VM-3 machine designed specifically for mold makers.

By any measure, the 2007 Canadian Manufacturing Technology Show (CMTS) was a success.

The show, which was held at the Direct Energy Centre in Toronto, ON, featured over 400 exhibitors covering 180,000 sq. ft. of exhibit space. This year’s show also marked the first occasion that the Society of Manufacturing Engineers (SME) was the organizer and sponsor of CMTS.

In general, exhibitors were pleased with the show both in terms of the total number of attendees and the quality of attendees. “It has been a very good show for us,” says Patrick Nehis, product manager with Walter USA Inc. “We would like to have a little bit better position next time and move closer to the machine tool exhibitors because that is where most of the traffic is that we are interested in.”

In fact, several exhibitors reported selling machines off of the floor at CMTS 2007.

One highlight at DMG Canada's booth was the DMU 100P duoBlock machine.

One highlight at Rockford, IL-based Ingersoll Cutting Tools’ booth was the firm’s MaxLine of tools. “This is one of our product staples that Ingersoll is known for,” says Ron Schneider, product manager-MaxLine with Ingersoll.

“We’ve been making tools with this kind of mounting system for years and years. We’ve pioneered this type of product and refined it. We have a molded rake face product now that is very conducive to cutting ferrous-type long chipping materials. This design provides more efficient removal of cubic inches per minute of material,” says Schneider.

CMTS 2007 is the first CMTS show that Ingersoll has exhibited at since the 2001 edition, notes Don Zazula, Ingersoll’s general manager for Canada. “Ingersoll has come up with so many innovative products and concepts and coming here to the show this year allows customers to (view all of the products) in one location,” he says.

The Nexus HCN 4000-II machine shown here on display at A.W. Miller Technical Sales' booth features new and improved spindles.

According to Zazula, the response from visitors to Ingersoll’s booth was very positive. “We’ve had a lot of attendees come and look at our products and I’m sure this is going to open a lot of doors for us (in Canada).”

At Clarence, NY-based Dynabrade Inc.’s booth, the firm showcased a variety of tools. “We are trying to show a wide range of tools ranging from finishing tools to heavy duty grinding and material removal,” says Len Fisher, Dynabrade’s Ontario sales manager.

According to Fisher, Dynabrade has enjoyed a strong year in terms of business. “Certainly the (strong) Canadian dollar has been an issue with distributors in Canada. Despite the currency issue, some manufacturing sectors are slow and some manufacturing sectors are stronger than ever.

The Strippit VT30-1225 CNC turret punch press was the centerpiece at LVD Strippit′s booth.

“It’s tough to get a read on the situation. However, it hasn’t effected our business because we’ve grown 12% worldwide this year. There are emerging markets in Europe, Canada is holding its own, and we are also bringing out some new products in 2008,” says Fisher.

Dan Ferko, president of Haas Factory Outlet, a division of Sirco Machinery Co. Ltd. of Toronto, says that the company decided to exhibit the Haas EC-1600 horizontal machining center at this year’s show.

“This is the first time we’ve shown the EC-1600 at CMTS,” says Ferko. A rugged 50-taper horizontal machining center with 64 in. x 40 in. x 32 in. XYZ travels, 64 in. x 32 in. table and 6,000 rpm, geared-head spindle, the EC-1600 features massive cast-iron construction. Extensive internal ribbing on the castings increases rigidity and damps vibrations.

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September 2007 issue

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