SMEs in Canada Face Compelling Challenges in 2023

Here is How You Can Tackle These Challenges and Make it the Best Year for Your Business

Small businesses have faced several challenges in the last couple of years due to global economic challenges. Canadian SMEs are likely to face these challenges in 2023 too.

Being a small business owner is challenging and rewarding at the same time. With the right strategy, you can tackle these challenges well.

Economic Downturn Continues

The Royal Bank of Canada was the first leading bank to predict a Canadian contracting economy in 2023. The Bank of Canada predicts a similar economic downturn to continue as well.

The Bank of Canada expects the GDP to grow at a sluggish rate of 0.5% (annualized) only. Much of it is due to local and global economic challenges like supply chain disruptions, wars, and rising economic costs.

The central bank’s interest rate is likely to increase more from the current 4.5% to curb inflation. Similarly, the wage rate is expected to remain at around 4%.

Supply Chain Disruptions

With another wave of Covid-19 cases in China and Japan, we’re yet to return to normal supply chain levels from these countries, and eventually globally too.

Similarly, the prolonged conflict between Russia and Ukraine continues to further disrupt supply chains globally. Moreover, fluctuating oil prices have an impact on supply chain and production costs worldwide too.

It means small businesses in Canada will continue to face a shortage of supplies and rising logistics costs in 2023 as well.

Shortage of Skilled Workers

The talent gap is rising for businesses of all sizes and not just in Canada but worldwide. The trend is likely to worsen in 2023 and beyond with several factors to keep in mind.

Accelerated digital transformation and automation mean fewer workers. It also means a hybrid workforce that can work from home too.

Small businesses also face challenges to keep up with the salary raise challenges. Thus, they’ll further be challenged to retain or hire skilled workers.

Embracing the Digital Transformation

Internet of Things (IoT), virtual reality (VR), augmented reality (AR), and remote working trends have already had an impact on the digital transformation of businesses globally.

In the last few years, businesses are experimenting with artificial intelligence (AI), robotics, and moving to the super-fast internet with 5G.

SMEs facing financial challenges will have to embrace the digital transformation to stay abreast of their competitors or would pay the cost of being left behind.

Sustainability Challenges and Opportunities

Another key challenge that small businesses in Canada face is the renewed focus on sustainability having seen the recent environmental catastrophes around the world.

Consumers are looking to buy from businesses with environment-friendly products too. At least, they want to see businesses investing in their sustainability frameworks.

Best strategies to Overcome These Challenges for Small Businesses

Despite these economic and labor challenges, most small businesses in Canada remain optimistic about profitability in the short term at least.

Here are a few tips to tackle these challenges and turn them into opportunities in 2023.

Rethink Debt

Since the interest rates are expected to rise further, rethink your debt management policy for the next year.

Refinancing or applying for a new debt currently is likely to cost you more. At the same time, you can take advantage of higher interest rates on investment instruments too.

Instead, manage your operational expenses by reducing costs and improving the operational efficiency of your business.

Map Your Supply Chain Risks

As a small business if you rely on imports and global supplies, you’ll have to consider alternatives. Before that, map your supply chain risks and identify potential bottleneck points.

Find local raw materials and maintain a balanced inventory level. Also, invest in alternative suppliers to stay afloat. Optimizing your production schedules with delayed supplies can also help a lot.

Retain Talent, Automate Tasks

Automation, digitization, and remote working trends are the major catalysts of the talent gap. It also means employees have more choices than ever before.

The cost of rehiring or new hiring is enormous as compared to retaining the current talent with pay rises or incentives.

Then, invest in automation and digital transformation to reduce reliance on human resources. Employee retention requires careful considerations including costs, lack of new talent, and training costs.

Invest in Technology Wisely

A key challenge that any small business would face is to invest in new technologies in tough economic conditions. However, the cost of falling behind the competition is substantial too.

Adopting newer technologies like AI or VR can help you boost sales and operational efficiency alike.

Rethink Your ESG Policy

Small businesses must bring a renewed focus on environmental, social, and governance (ESG). the aim should be to find sustainable resources and environment-friendly products.

As a starting point, small businesses can start measuring their impact on society, the environment, and governance issues.