Only four per cent of Canada’s 950,000 small and medium-sized companies are considered to be high performing, says the Business Development Bank of Canada in a study released on Tuesday.
The BDC study, Built for performance – Discover strategies used by Canada’s leading SMEs, found the following key strategies for high performing SMEs:
- Offer employees higher compensation. At high-performing businesses with $2 million to $10 million in sales, average compensation is 45 per cent higher than the sector average.
- Expand internationally. Top SME exporters earn 21 per cent to 26 per cent of sales from exports, versus 16 per cent to 19 per cent at other exporting businesses.
- Carry less debt in proportion to their assets, giving high-performing businesses more leeway to invest in growth.
“The findings are a roadmap for success based on proven lessons from top entrepreneurs,” said Pierre Cléroux, vice-president of research and chief economist at BDC, in a statement. “This study offers entrepreneurs an amazing list of tips and information they can use to improve their bottom line. If Canadian businesses adopt the strategies of the top performers, our economy will benefit and the living standards of all Canadians will improve.”
The BDC study said top-performing smaller businesses (those with under $2 million in annual sales) should focus chiefly on growth, allowing them to achieve economies of scale and productivity gains that will help improve profits. “Those profits can be reinvested, leading to a virtuous cycle of improvement and competitiveness gains.”
It said successful mid-sized businesses ($2 million to $10 million in sales) should invest more in machinery and equipment, particularly information and communications technology, as well as intangible assets such as patents and employee training. “The investments will help these businesses become more competitive and innovative.”
And the study said leading larger businesses ($10 million to $100 million in sales) should expand even more internationally, which diversifies their revenue sources, reducing risks, and leads them to become more competitive.
Respected business writer Mario Toneguzzi is a veteran Calgary-based journalist who worked for 35 years for the Calgary Herald in various capacities, including 12 years as a senior business writer.
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