"If I had to use one word to describe what we've seen on the part of small business, it's definitely flexibility,' " says Rod Hunt, national manager of small business for Royal Bank of Canada. "From farmers and butchers to tourism operators, this year has been a real challenge."
The ability to roll with the punches, to be adaptable, doesn't come overnight but with planning. Small business has shown remarkable resilience, but much of this has been accomplished by strategic thinking on the part of the entrepreneurs, Hunt says with admiration.
"You need to ensure that your company is well capitalized," he advises. "This is really important, so that, if for any unforeseen circumstance your company finds a sudden drop in revenues, you can withstand the temporary situation."
Equally important is open lines of communication with both your banker and your suppliers. "Another word I think is important is 'anticipation.' If you think your company may soon have problems, don't wait until the 11th hour to come forward to your banker and, perhaps, your suppliers.
"If you talk with them openly, there may be a number of alternatives that you could access to see your company through difficult times. But if you come to them when things are really tough, it may be that there are very limited options available to you. So once again, it pays to think ahead."
Planning for change is indeed important, agrees Benjamin Tal, a senior economist at CIBC World Markets.
In today's environment, there are so many outside influences that have a real impact on Canadian independent businesses.
An example is the high value of the dollar. Businesses across the board do benefit from the low interest rates that the high dollar has helped to create.
Yet, ironically, the state of the dollar has had a real impact on individual SMEs (small and medium enterprises), depending on their sector and sphere of activity. "The high dollar has been a real bonus for some small and medium-sized businesses and a real detriment for other," Tal says. "Thirty per cent of small businesses are suffering from the high dollar, with about 20 per cent benefiting," he says, based on extensive research.
"The impact of the high dollar is fairly narrow in that it is hitting specific sectors very deeply," he continues.
"For example, [it hits] companies that rely heavily on the export of their products, especially to the United States, or whose main customers are companies that export."
He suggests that companies "don't suffer in silence. If your company is negatively affected, speak with your banker about ways to hedge your exposure."
Tal also thinks entrepreneurs should contemplate what he calls "natural protection via diversification."
By this he means counterweighting the effects of the dollar. "Let's say your company's export sales are down because our dollar is high.
"Could you help your business by importing some of your resources and thereby utilize the high dollar to offset some of your costs?"
Check your credit rating -- both yours and your company's -- advises Susan Kennedy-Loewen, vice-president of small-business banking at Bank of Nova Scotia. As an entrepreneur, you need to know that your ratings are in good shape, she maintains.
After all, business is fluid, and there may be times that you need to borrow money or change your financing. Having a good credit rating can be key to gaining the financing needed to expand your business, for example.
"Your credit rating informs potential lenders about your past performance and gives a really good indication of how you -- or your business -- will pay back money you borrow," she explains.
"Your credit record and/or that of your company will also give information to the lender, such as how high your credit limits are on credit cards and how much you have borrowed in the past and paid back," she adds.
"Your credit bureau report is not static; it changes every month and you need to take control of it. I'd advise entrepreneurs to check their reports annually and make certain they are correct.
"If your bank cannot assist you with financing because of an unsatisfactory credit report, ask what you can do to correct the situation and over what time frame." As well, she suggests having an "open, honest conversation" with your banker to explain why your credit report is that way.
"Perhaps another company had a challenge and did not pay your company, or your company grew too fast. The banker needs to understand the context of the credit report."
Managing your cash flow, now and for the future, are key elements of a small-business strategy, suggests Kathleen O'Neill, executive vice-president of business banking at Bank of Montreal.
If your company has positive cash flow, it bodes well for both short- and long-term planning, she advises.
"As we see more and more small businesses mature, we are seeing a corresponding interest by owners in planning for succession and for selling of their companies," she says.
"The baby boom generation has worked long and hard building their businesses. Many of these owner managers have built up substantial equity in their companies and now the issue becomes: How much of this cash should be distributed on an ongoing basis? How much remains in the company for future growth -- all with an eye to the future of succession planning and retirement?"
"Oftentimes, we see entrepreneurs who have most -- if not all -- of their equity in their company. They have not invested outside of their business," O'Neill says. "This is especially true in the agricultural sector, where most farmers have the tendency to invest in the farm, so that their wealth is built almost entirely into the farm operation."
O'Neill's advice: Talk to your banker about your current cash-flow situation and your hopes and goals for the eventual disposition of your company and your subsequent retirement.
If entrepreneurs have one thing in common, it's that they are always pressed for time, says Nick Stitt, vice-president of small-business banking at Toronto-Dominion Bank. Yet many entrepreneurs still conduct their banking in a time-consuming fashion, he notes.
"Entrepreneurs want to concentrate on their company's core business and need to find time-saving ways to devote their energy and skills to making their company stand out from the crowd and succeed," he says. Internet and telephone banking -- even time savers such as picking a less crowded time to go the bank (lunch time can be really crowded) -- can all contribute to having more time to do what you do best, which is show leadership among your management and employees, he says.
© The Globe and Mail
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