Costs erode bottom line for small businesses in British Columbia – BC News

0


As restaurants, nail salons and niche clothing boutiques decorate their locations with fake cobwebs and plastic pumpkins ahead of Halloween, a truly chilling prospect is haunting many of these small business owners this month. .


“They are challenged by [having] have had to increase their costs,” said Tom Conway, CEO of the nonprofit Small Business BC, which offers resources for entrepreneurs.


“They see from their salespeople that they had to pay more. So somewhere that cost has to be offset and usually, unfortunately, that has to be passed on to the consumer.


British Columbia’s small and medium-sized enterprises (SMEs) now find themselves in a delicate balancing act to determine how much they can raise costs without alienating customers. Unlike retail giants such as Walmart (NYSE:WMT), these SMEs lack the scale power to alleviate some of the inflationary pressures hitting the economy.


“There’s a fine line where you have to decide how much your price increase is worth because your prices have also increased on your products,” Conway said.


Businesses hardest hit at the start of the pandemic, such as those in tourism and catering, are now also bearing the brunt of inflationary pressures, he added.


British Columbia’s inflation rate hit 7.2% last August, the latest data from Statistics Canada shows. In the same month a year ago, inflation growth in the province was just 3.5% – still above the Bank of Canada’s 2% target.


Four in five small businesses (82%) in Canada now want different levels of government to do more to stem the tide, according to a Sept. 29 poll from credit bureau Equifax Canada Inc. of inflation.


Of the 300 SMEs surveyed in the survey, 87% said they had been forced to raise prices due to inflation – a decision that 78% of respondents said hurt their business.


These cost pressures also come at a time when interest rates are rising rapidly. The Bank of Canada has raised its key rate by 300 basis points since the start of the year in an effort to cool the economy and curb inflation.


As a result, the cheap capital that many SMEs turned to at the start of the pandemic has evaporated.


“For many small businesses … this pandemic has been brutal,” said David Gens, founder and CEO of Vancouver-based Merchant Growth Ltd., a fintech company specializing in small business lending.


Although many small businesses are now dealing with inflation after weathering the peak of the pandemic, People said delinquency rates among his company’s customers are still below historical averages.


But he expects that as the new year dawns, when many economists predict Canada will be in the midst of an economic downturn, SMEs that rely heavily on discretionary spending such as jewelry and high-end electronics will have a harder time.


Even though the Bank of Canada raised its key rate — another rate hike is also widely expected on Oct. 26 — Gens said Merchant Growth has yet to raise prices for its clients.


“We also saw very good performance in terms of payments,” he said. “And that allows us to not have to raise prices.”


Meanwhile, Conway said persistent labor shortages coupled with high inflation will eventually weigh on businesses still emerging from the pandemic.


“Some businesses will have to make tough decisions and perhaps close if they can’t fight each of these economic impacts enough to stay open.”

Share.

About Author

Comments are closed.