Inflation, input costs, debts: A snapshot of small business conditions

Small businesses, where a large proportion of Canadians work, have long contributed an outsized amount to the country’s economy.

Challenges continue to be a part of operating a business in the current economic environment. The Canadian Survey on Business Conditions (CSBC) recently surveyed businesses of all sizes on how they are doing.

Here are some of the latest CSBC data on what small businesses (ranging from 1 to 99 employees) have been telling us about obstacles, prospects for growth, and other issues.

Rising inflation, rising cost of inputs, and rising interest rates and debt costs are top obstacles for businesses of all sizes

In the third quarter of 2024, half of all businesses (50.2%) reported rising inflation as an expected obstacle over the next three months, making it the most common obstacle reported. It was also the top obstacle for businesses with 1 to 4 employees (47.7%), 5 to 19 employees (55.4%), and 20 to 99 employees (49.8%). It was also the second most common obstacle (42.8%) for businesses with 100 or more employees.

The rising cost of inputs was the second most frequently reported obstacle over the next three months, with more than two-fifths of all businesses (41.8%) indicating this. Businesses with 1 to 4 employees were least likely to report this as an obstacle (35.9%), compared to businesses with 5 to 19 employees (50.2%), 20 to 99 employees (46.9%) and 100 or more employees (42.8%).

Rising interest rates and debt costs was the third most expected obstacle, reported by more than one-third (34.1%) of all businesses. Smaller businesses reported this obstacle with a similar frequency (33.2% for businesses with 1 to 4 employees and 33.9% for businesses with 5 to 19 employees), whereas two-fifths (40.2%) of businesses with 20 to 99 employees reported this. Conversely, a little over one-quarter (26.7%) of businesses with 100 or more employees expected rising interest rates and debt costs to be an obstacle over the next three months.

Larger businesses more likely to take on more debt, have cash and liquid assets required to operate

In the third quarter of 2024, almost two in three businesses with either 1 to 4 employees (63.0%) or 5 to 19 employees (63.7%) said they could take on more debt over the next three months, rates similar to all businesses (64.5%) but considerably less than those with 20 to 99 employees (73.5%) or 100 or more employees (75.7%).

Similarly, about 7 in 10 businesses with either 1 to 4 employees (71.4%) or 5 to 19 employees (70.6%) had the cash or liquid assets required to operate over the next three months, similar to all businesses (72.5%). In contrast, more than four-fifths of businesses with 20 to 99 employees (81.4%) or 100 or more employees (82.4%) reported having the cash or liquid assets to operate over the next three months.

Smallest businesses satisfied with current level of growth

In the third quarter of 2024, about one-tenth of all businesses (10.6%) did not expect revenue growth over the next year, and among these, over one-quarter (27.0%) were satisfied with their current level of revenue. Those with 1 to 4 employees were much more likely (35.9%) to report being satisfied with their current level of revenue,  compared with those with 5 to 19 employees (7.3%), 20 to 99 employees (16.1%) or 100 or more employees (4.4%).

Among businesses that did not expect revenue growth over the next year, 16.9% cited intense competition as the reason they did not expect revenue growth. Businesses with 1 to 4 employees (13.2%) were least likely to mention this reason, compared with businesses with 5 to 19 employees (24.3%), 20 to 99 employees (26.2%), or 100 or more employees (22.5%).

Among businesses that did not expect revenue growth over the next year, 10.2% said one of the reasons was that it was challenging to hire staff. Businesses with 1 to 4 employees (5.6%) were least likely to mention this reason, compared with businesses with 5 to 19 employees (18.6%), 20 to 99 employees (26.3%), or 100 or more employees (10.9%).