The Canadian economy declined for the fifth consecutive month in May, according to a recent announcement by Statistic Canada, and while economists and politicians debate the correct terminology for the current economic state, many small businesses say they are already feeling its effects.
Kimberley DeLeeuw, the co-owner of Cornerstone Transport Ltd., a trucking company based in Carrot Creek, Alta., more than 90 minutes west of Edmonton, has been struggling with slumping profit in the transportation industry in Western Canada since January, as a result of declining oil and gas prices.
"We're at about 25-per-cent capacity," she said, adding that the slowdown is now felt by small businesses in most Albertan communities. "Everything is coming to a grinding halt."
The current economic situation is in sharp contrast with the boom experienced by Cornerstone Transport before the start of the new year.
"We could not hire enough people; we could not have enough trucks and equipment," said Ms. DeLeeuw, who started the small business with her husband, Don, in 2001. "We just have a few rigs now, compared to before Christmas."
Though many small businesses in Canada remain unaffected, the recent economic downturn is hitting certain provinces and industries particularly hard, and economists fear that there could be spillover into other areas the economy.
"Certainly the impacts start at a very regional and sectoral level, but as the impacts cycle through the economy, they create their own impacts, and those impacts have other impacts," said Ted Mallett, the vice-president and chief economist for the Canadian Federation of Independent Businesses.
Mr. Mallett suggests that it is too early to tell which direction the economy will go from here, but is quick to point out that business confidence is nowhere near as low as it was during the economic downturns of 2008 and 1990.
The CFIB's Business Barometer, which measures business confidence on a 100-point scale, dropped to a score of 58.2 during the month of July – the lowest rating since mid-2009, yet is not nearly as pessimistic as during the last recession.
"Compare that with 2008-2009: The lowest number we got was 39 on the index, so that was still 20 points below where we are now," Mr. Mallett said. "Most sectors are doing okay, all things considered. We are dealing with a big change in the way that the Alberta – and to some degree, Saskatchewan, Newfoundland and Labrador – economies are functioning at this point, so those are the problem areas, and it means big adjustments for a lot of businesses in those regions."
Still, some economists in Canada hesitate to call the current economic climate a recession.
"It's a very mild recession, if you're going to call it that, and I even have trouble using that term in the sense that employment is actually rising right now in Canada," said Michael Burt, the director of industrial economic trends for the Conference Board of Canada. "We actually created almost 100,000 jobs since the beginning of the year, so that's actually not a bad pace for job creation."
Another factor helping small business owners weather the economic uncertainty are their vivid memories of the 2008 crisis, which reinforced the importance of sound business principles.
Ms. DeLeeuw, for one, still remembers collecting bottles and cans in order to buy groceries for her family at the height of the Great Recession.
"I don't know if we've ever been so scared, financially, in our lives," she said. "I never want to do that again."
Ms. DeLeeuw and her husband have been vigilant in managing the company's debt load ever since, and now keep an emergency savings fund that has helped them to keep the business running as oil prices continue to plummet.
"Uncertain times heighten the awareness of the need to do these kinds of things, but these are all strategic decisions that any business should be doing at any time, whether times are good or times or bad," Mr. Mallett said. Small businesses owners are at a greater risk of getting caught up in day-to-day operations, he added, making them less likely to consider and implement long-term strategies to mitigate the risks of a downturn.
"It may be worth modelling the situation with scenarios," he said. "How would you deal with the nightmare scenario of losing a major customer? What are your contingency plans? It's always good management practice to keep these kinds of scenario plans in play."
Innovative small businesses in Canada can even find new opportunities during times of economic turbulence, the Conference Board of Canada's Mr. Burt said. For example, expensive equipment is often available at wholesale prices when the economy is slumping, and struggling corporations who are forced to exit the market leave more room for small businesses to fill the void.
"Even though the pie might have shrunk, if that means certain players are exiting the market, then the ones that remain there should be able to benefit and grab a bigger piece of the pie," he said.
Mr. Burt said that a low Canadian dollar coupled with a relatively strong American economy makes it an opportune time for entrepreneurs to consider exporting their products and services, allowing them to further diversify their customer base and insulate their businesses from local economic trends.
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