A portrait of Canada's SMBs

Canada's SMBs are faced with several hurdles in their pursuit of growth. According to this year's polling, cybersecurity and emerging technologies rank first and second among businesses' perceived threats. This can be attributed in part to the swift evolution and uptake of disruptive technologies. These emerging technologies may bring many advantages, but they are nonetheless expanding the cyber risk landscape and adding greater complexities around data privacy and protection issues.

The cost of doing business also ranks high among perceived threats to SMB growth. This is in no small part due to rising interest rates and inflation that are contributing to overall higher operational costs. Relatedly, the challenges of shifting to cleaner operations and energy sources have also made issues of energy security, environment, and climate change top of mind.

Canada's SMBs have taken multiple organic and external strategies to pursue growth. They include increasing prices to customers, halting expansion plans, reducing operating costs, upskilling the workforce, introducing automation, exploring mergers and acquisitions and modernizing supply chain strategies.

Cybersecurity is a business priority that has taken on new complexities (and anxieties) for SMBs. This is partly in response to the upswell of disruptive technologies that are adding to the cyber risk landscape and the fact that, over the past year, a large share (63%) of SMBs have been the target of a cyberattack (e.g., ransomware, malware, data theft, denial of service, etc.).

The perceived cyber threats have grown among SMBs, yet 71% feel their legacy systems make them vulnerable to cyberattacks. And given that 66% of SMBs say their organization lacks the internal skills and capabilities to implement cybersecurity controls or monitor the digital landscape for attacks, it is no wonder cybersecurity sits at the top of their greatest perceived threats.

SMBs are showing more reserve when it comes to technology investments. However, they still see the advantages of digital transformation, with 87% looking to turn data into useful insights to identify inefficiencies and reduce or control costs. The overwhelming majority (97%) agree that keeping up with tech will be central to staying ahead of competitors.

AI has become the focus of the digital transformation conversation. About a third (32%) of SMBs strongly agreed that they are racing to seize on the potential of AI and the same number are recruiting actively for talent, such as data scientists, technical professionals, and machine learning specialists, to help them deploy AI technology.

The majority of SMBs are encouraging their employees to upskill in areas like AI and data analytics to improve their operations and make informed decisions.

The time for theorizing about climate change is over. Today’s SMBs are contending with the very real effects of extreme weather events across their organizations. Well over half have been directly impacted by extreme weather events, which have resulted in rising operating costs.

Most SMB leaders recognize the need to take action on climate change through the widespread adoption of eco-forward practices and policies. And yet, many say they lack a clear vision as to where to begin and the time and resources to adequately measure, analyze, and reduce their carbon footprint. Regardless, there is a clear drive to push past these obstacles.

Canada’s SMBs remain committed to making good on their environmental, social, and governance (ESG) objectives. SMB leaders acknowledge that a greater emphasis on ESG is simply "good for business" in regards to meeting stakeholder expectations, attracting and retaining talent, and staying ahead of climate change regulations.

Attitudes toward embracing ESG are encouraging. However, the majority of SMBs say it is difficult to stay current on specific ESG regulations and standards. Herein, a significant opportunity exists to help businesses as they progress along their ESG journeys.

Canada’s SMBs are well aware of the need to stay in compliance with tax measures, reporting obligations, and regulations. Still, 57% are finding it difficult to do so as Canada's tax landscape becomes more complex. Moving forward, 79% believe leadership plays a larger role in the business's tax strategy than they have in the past.

Upcoming changes to tax legislation (i.e., succession planning, charitable contributions, and interest deduction) are a source of concern for most SMBs. The majority (63%) of SMBs believe recent tax amendments affected their intergenerational succession plans. And while they feel taxes can be a burden, most acknowledge that taxes are an effective tool for driving the green economy (74%) and for achieving broad societal objectives such as affordability and income equality (65%).

Succession planning is gaining momentum in the SMB community, particularly within family-owned businesses, which represented 41% of this year's respondents. Seventy-five per cent of SMBs are accelerating their transition plans due to several factors, such as concerns about continuing to lead in an era of constant uncertainty, mounting ESG pressures, reluctance to keep pace with new technologies, or even a desire to retire earlier than expected.

Overall, a majority of Canada’s SMB leaders are looking to transition their business to a next generation family member or new outside leadership. However, of the family businesses surveyed a large majority (71%) feel the next generation isn’t ready for the responsibility, and to mitigate continuity risks family businesses should have a detailed intergenerational succession plan.

On the surface, it may appear that SMBs hold conflicting opinions on talent. While 26% have already reduced headcount and 55% plan to in the next three years and 85% have either initiated or are planning to initiate hiring freezes for the short term, many are still searching for individuals with the skills needed to fuel growth, adapt to critical technologies, and adapt their workforce to the new economy.

Even with the influx of skilled immigrants to Canada, a vast majority (84%) are not finding the right talent to match these objectives with 72% of SMB leaders recruiting directly outside of Canada for highly skilled labour (e.g., data scientists, engineers, IT, tradespeople, etc.).

Moreover, a majority of SMB leaders (74%) believe that Canada’s high cost of living and access to affordable housing is making it more difficult by the day to attract and retain top talent, be they sourced domestically or from abroad.