Global Business Outlook: Canadian Economy Ranks High

While the global recession is still a major economic factor in many countries, the Canadian economy is rebounding very well. A stable banking sector combined with lower employment, have contributed to Canada's recent rise in global economic standings.

According to annual rankings by the Conference Board of Canada, the Canadian economy ranked 11th of 17 developed countries in 2008. However, based on current forecasts by the Organization for Economic Cooperation and Development (OECD), the country's ranking is expected to catapult to 5th place in 2010. The OECD's forecast for growth, unemployment, and various other economic factors revealed that Canada is expected to rebound from the global recession at a rate that far exceeds many other developed countries.

Both the United States and Belgium are also expected to rise in global economic rankings. However, Switzerland, Britain, and the Netherlands are expected to fall. Norway was ranked in first place in 2008 and is predicted to remain in first place through 2010. This high ranking is attributed to the country's large petroleum sector as well as its resilient economy. At the bottom end of the scale is Ireland whose 17th place economic ranking is expected to continue into 2010.

Although Bank of Canada Governor Mark Carney recently announced that the recession is over, many unemployed Canadians would disagree. On the other hand, consumer confidence has displayed an upward trend since the beginning of 2009. As well, investment portfolios have begun to recover, housing prices have risen, and the key lending rate in Canada is at an historic low.

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U.S. Economic Stimulus Plan Harms Canadian Business

While the U.S is struggling to recover economically from the global recession, certain measures enacted by the American government to bolster the struggling U.S. economy may harm Canadians as part of the price.

Canadian leaders, including the provinces' premiers, are united in their opposition to the "Buy America" provision in the U.S. economic stimulus package. The "Buy America" provision in the landmark $787 billion stimulus package states that government contracts in the U.S must use only products made in America. For Canadian manufacturers of iron, steel, and other manufactured goods that would be used in public works and building projects funded under the U.S. stimulus package, this translates into almost $280 billion that cannot enter the Canadian economy.

While Canadian leaders are quick to embrace the spirit of recovery of the nation's largest neighbour, they are quick to point out that a large portion of Canada's manufacturing industry is based upon trade with the U.S. The provincial leaders are supporting the federal government's efforts to exempt Canada from this controversial clause in the U.S. economic package.

Some provincial leaders, as well as representatives of the industrial community, fear that the "Buy American" clause may force some Canadian industries to relocate to the U.S. in order to survive and continue manufacturing. In a sad irony, some Canadian manufacturers have recently seen a large increase in orders from the U.S., fueled by economic stimulus funds. However, while the increase in business is encouraging for the Canadian economy as well, the orders may have to be produced in the U.S. in order for the funds to flow to both the U.S. and Canadian companies.

Some Canadian companies have considered a boycott of American products in retaliation. However, a major shift in U.S. policy will only come to be at the national leadership level.

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It's All in the Cards

Believe it or not, there more to a business card than meets the eye. In the highly competitive market of job searching, a custom designed and creative business card can make the difference between obtaining an interview or just becoming another face in the crowd.

Many people prepare business cards containing personal information and nothing more. However, when your goal is to be noticed, presenting a unique calling card may be just what is needed to get you noticed.

Potential employers are continually approached by job seekers. In today's recession, the numbers are with the employer. They can take their pick from a large number of qualified applicants. Therefore, it is imperative to make a noticeable first impression.

A standout business card should quickly and effectively communicate who you are and what you can contribute to an organization. The first glance should grab the reader's attention. A tag line or several bullets will get your message across. Don't restrict yourself to one colour. The human eye is attracted to differences so choose a different colour ink to highlight the key points.

Many people forget that a business card is two sided. Quite often, a potential employer will use the back side of the card to jot down notes about the person he has met. Be one step ahead and print a mini-resume on the back. But, don't make it too busy. If the letters are too small, no one will read it.

Think carefully about the look of your business card. Don't cut corners by preparing it at home. The card should be printed on a proper card stock and cut by machine. Maintaining a professional look is crucial. Nothing could harm you more than a well prepared card that has an at-home, arts and crafts look to it.

Look is important but so is size. Most business cards are standard size. Cards that are shaped differently or are too large may be noticed but may also be discarded, as they will not fit into standard card holders.

Investing some thought, time, and money in your business card may be the right step in securing your next job.

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An Economy Divided

The global recession has literally divided Canada into two halves – stable economic sectors and slumping sectors.

Canada's service industry has been extremely resilient and has weathered the economic storm surprisingly well. Service industries including finance, insurance, health care, real estate and construction dropped approximately 1 per cent last winter but have since rebounded rather well. Employment in the services sector has been fairly stable as well. Although construction output and jobs had fallen at a somewhat greater rate than other services, these, too, have stabilized and are showing improvement. Sales of existing homes are showing record levels. The service sector's strength is attributed to its self reliance, rather than dependence on external global factors.

On the other hand, Canadian manufacturing is in desperate shape. Its dependence on foreign, rather than domestic, concerns may not portend well for Canadian manufacturers in the hear future. Key production concerns in Canada include base metal mining, aluminum production, and auto and aerospace manufacturing. As foreign buyers continue to reject Canadian made products including cars, planes, metals and other industrial products, shipments and sales have continued to slide to the lowest levels in the last decade. The lion's share of this decline has been felt in Canada's industrial heartland – Ontario and Quebec. Indeed, Canada's manufacturing numbers were far worse than figures released for U.S. industrial production. About 11 per cent of Canada's industrial workers – some 220,000 employees have lost their jobs due to the economic slump.

Despite early signs of global recovery, the strength of the Canadian dollar has made Canadian made products more expensive relative to foreign-produced products. Thus, foreign purchases are being directed to lower priced products.

The current trend in the manufacturing sector is not expected to show signs of improvement until well into 2010.

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Creating Jobs and Saving Businesses

Thanks to the Canadian Government's recent investments in the Business Development Bank of Canada (BDC) through the Business Credit Availability Program, the BDC is experiencing a record increase in loans to businesses across the country.

By improving access to credit for Canadian businesses via the Canada's Economic Action Plan and Business Credit Availability Program, the Government is helping the business community not only weather the current economic slowdown but continue to thrive.

Recent statements by Canada's Minister of Industry, Tony Clement, indicate that the Government is pleased with its economic stimulus program. The various programs are creating jobs and saving businesses.

The BDC's increased lending activity has been felt across the country. In June 2009, the amount of loans accepted exceeded figures for the same period in the previous year by 57%. In the first fiscal quarter of 2009/2010, ending June 30, the total dollar amount accepted by BDC loans escalated by 37% from $738 million in 2008 to slightly more than $1 billion in 2009. The BDC reports that this has been the largest increase in its history.

The Canadian Economic Action Plan was designed to assist businesses and entrepreneurs by improving access to financing through enhanced cooperation between government corporations and private sector financial institutions. Financial experts from the BDC have worked closely with their private sector colleagues to ensure that solutions are found to secure funding for creditworthy businesses. Another branch of the Business Credit Availability Program is Export Development Canada (EDC). Working together, EDC and private sector financial institutions are providing more than $5 billion in loans and other credit support to businesses with viable business models but whose access to financing might be restricted.

Private sector and Government – working together to help Canadian businesses thrive.

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Alternative Financing For Your Business

The story is much the same for many a small business looking for credit today. After all, credit is the oxygen that many businesses rely upon. Traditionally, the source of that credit was the bank. However, the times are changing and many businesses have begun to realize that banks may not be the best resource.

In order to stay afloat, banks have made their lending procedures quite rigid. The rules and criteria are simply not realistic for many small businesses. As such, several unconventional forms of financing are available to small businesses. Business owners admit that they may make less money but unconventional financing allows them to maintain their businesses during these rocky times.

An asset-based loan (ABL) is one such form of financing. Most applicable for a manufacturing business, this type of loan allows the owner to use existing merchandise as collateral for the loan. Customers order new merchandise based on the existing products. In the worst case, the owner would have to sell his inventory to repay the loan.

Another method on the market is contract financing. In this scenario, the lending institution finances the purchase order, rather than the manufacturing process. After completion of the transaction, the lender receives an agreed-upon percentage of the profit.

The need to seek alternative financing methods has forced small business owners to carefully examine their businesses. After all, if the business was stable, there would be no problem securing bank credit. The banks are in the business of lending money that will be repaid. The silver lining in the cloud is that small businesses are becoming more professional. In the long term, this can only benefit them and the financial community.

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The Value of Customer Service

At the end of the day, your product may be outstanding and you may provide terrific value, but, let's face it, times are tough for small businesses. People are spending less today. Many businesses have limited funds available to maintain or increase sales. What, then, is a business to do? The answer lies with your most important resource: your customers.

It all boils down to customer satisfaction and customer loyalty. Maintaining your customer base is vital. Therefore, it's important to know what the customer is thinking. Businesses have to establish methods to listen to their customers and, no less important, to respond. Customer feedback should be viewed as a gift to your business.

Far too many businesses have become unreachable, preferring to communicate with their customers via text messages or e-mails. They have forgotten the importance of the personal touch. When was the last time you initiated telephone contact with a long standing customer to see why they have reduced their orders? One telephone call may be a terrific investment. You may discover that the customer has new needs or has been upset by a small matter that you were unaware of. Informal surveys can provide a wealth of information to help strengthen your business.

Business owners should not fear confrontation with the "disgruntled customer" as opening a Pandora's Box. Studies have shown that most disgruntled customers will not voice their opinion but will simply take their business elsewhere. Only 4% of disgruntled customers have mere complaints. Most have legitimate issues. The same studies have concluded that a 5% increase in customer loyalty can have a direct positive long term increase on a company's bottom line by anywhere from 25% - 125%.

The business owner who invests time in customer service is making a wise investment in these difficult financial times.

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Knowing the Value of Your Business

All too often, business owners will plan their retirement and estate based on their own personal valuation of their business. After all, could there be anyone more qualified than the owner to truly know how much the business is worth? The answer, surprisingly, is a resounding yes. According to experts, a business owner's self appraisal and evaluation of his company will generally be well off the mark on the high side. Business owners will allow their emotional and personal attachments to the business override their objective opinions, thus producing end results that may be quite inaccurate.

The best course of action is to retain a professional valuator. The valuator – generally an accountant – will work the numbers and forecast accurately. Objectivity is essential. The owner will look at where he has been and what he has accomplished. The valuator can take all the facts and figures and see where the business will be. For example, a valuator may conclude that the business is the life's work of an individual and the owner is the company. Remove him from the picture and the value of the company will plummet. This is often the case with small businesses. On the other hand, a larger business with multiple shareholders may have developed a succession plan. In this instance, the valuator will clearly see that a working plan is in order to allow the business to continue, even after the owner is no longer in the picture.

It is important to note, though, that business valuation is an art, not a science. Two valuators can arrive at different conclusions for the same business. The reason is that the valuator must make future predictions based on the present numbers. There is always a possible margin of error.

Be that as it may, a professional business valuation is an excellent tool to help business owners assess their company's worth with no emotional strings attached.

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Beyond the Southern Border

Historically, the United States has been Canada's dominant trade partner. With its relatively limited domestic market and vast resources, Canada has been quite dependent on exports to the U.S. However, the global economic recession has changed this reality, at least for the interim.

In fiscal year 2000, approximately 87 percent of all Canadian exports were to the U.S. Recent figures show a drop to almost 71 percent.

Politicians have long advocated diversification of trade relations as insurance against a serious drop in trade with the U.S. Now that reality has dictated a change, many Canadian companies are experiencing a drastic rise in income largely due to overseas trade partners that previously had not been considered.

While Canadians hope for a resuscitation of the U.S. economy, as export costs to the U.S. are far less than distant foreign addresses, the amount of trade with countries in Africa, the Middle East, and Asia has provided economic recovery for many Canadian businesses.

Canadian Prime Minister Stephen Harper has targeted the Chinese market as a partner for Canadian trade and will pursue the issue on an official visit to China later this year. In addition, his government is presently negotiating a trade deal with the European Union.

Most economists agree that the U.S. economy will rebound from the current recession, albeit not as quickly as Americans would like. In the interim, the Canadian economy is moving forward and has found new addresses to further trade. Having discovered these new lucrative markets, it is unlikely that Canadians will return to the high level of dependence on trade with the U.S. The global economy is maturing and Canadian resources are playing a vital role in this process.

Swim Before You Sink

The downturn in the economy has created "economic collateral damage." Small and medium-sized businesses have been forced into bankruptcy due to the credit problems of their customers, even though their businesses were solid.

Insolvencies in Canada rose 20% from January 2008 to January 2009. As such, many companies are currently at risk.

Experts state that even the best run businesses, with exemplary credit practices, cannot ignore what is happening around them. This is the time for companies to stop being "Mr. Nice Guy" and tighten credit policies with customers.

A common problem is that many business owners have signed personal guarantees to their banks in order to receive company loans. As they begin experiencing problems, they order large amounts of unpaid inventory and leave it for the bank to sell in lieu of repaying loans. The supplier is often the big loser.

Business owners should consider tightening the credit lines with their customers. Don't get caught with over-extended credit to a customer, even those that have been loyal for years. Circumstances may change that long standing relationship.

Credit checks should be conducted periodically. It may be wise to start using written contracts, rather than the informal handshakes of days gone by. If necessary, one should get indemnities or personal guarantees from customers. Essentially, a small pr medium-sized business wants to avoid being an unsecured creditor, should the customer close its doors. "Be prepared" is the credo of modern business credit practices.

One should also diversify, both in suppliers and customers. Being dependent on one primary supplier or customer can be extremely risky. Try to keep one step ahead of the game and put your own business interests first. Keeping one eye open at all times can prevent disaster.

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