CIBC Poll: Declining Canadian Dollar has Small Business Owners Worried

A new CIBC  poll conducted by Leger finds more than one-third of small business owners are worried about the impact the falling Canadian dollar will have on their business, yet nearly 7 in 10 say they have not taken any steps to protect their business from currency fluctuations.

Key findings of the poll of small business owners are:

• 36 per cent of small business owners say they are worried about the impact of the falling loonie on their business
   
• 65 per cent say they have no plans in place to deal with changes in currency
   
• Importers are the most likely business owners to be concerned about a lower Canadian dollar, with 86 per cent of this group expressing concern
   
• Within major business sectors, Manufacturing companies are the most concerned about the falling dollar (53 per cent), followed by Wholesale/Retail businesses at 44 per cent

"Our poll shows that some small business owners in Canada are feeling the pinch from the falling loonie, which can impact profits and make it harder to compete in certain industries," says Shelley Swanlund, Vice President, Business Banking and Head of Small Business, CIBC. "Many small businesses have become accustomed to a strong dollar, which may explain why many have not considered steps to protect their cash flow and react to the dollar's decline."

According to the most recent report available from Industry Canada, small businesses contribute as much as 41 per cent to Canada's GDP. While a lower Canadian dollar can benefit some business sectors like exporting and tourism, the impact on small business is often overlooked, says Ms. Swanlund.

Some business owners are raising prices or cutting costs to adapt

Among those small businesses which have taken steps to deal with the impact of the recent decline in the loonie, the CIBC poll finds that the most popular actions include reduced spending (14 per cent), pricing alterations (13 per cent) and sourcing new or alternative clients or suppliers (10 per cent).

"Reducing spending or raising prices are a natural reaction to dealing with a change in cash flow, but may not be sustainable in the long run," says Ms. Swanlund. "There are steps you can take to mitigate the impact of currency fluctuations on your small business through improving your cash flow management, and evaluating your foreign exchange needs to building a plan with your advisor that reduces the impact of a falling dollar on your business."

To prepare for fluctuations in the value of the Canadian dollar, CIBC offers the following tips:

• Have a currency plan. Small business owners should include in their business plans a strategy to manage currency fluctuations. Your bank can help – for example, CIBC small business advisors work with owners to explore options such as holding US dollar accounts and having access to capital to address fluctuations in cash flow. CIBC also offers online tools such as FX Online, a foreign exchange service for currency purchases, and free business planning tools, such as the CIBC Your Guide to Business Planning, found in the CIBC Small Business Advice Centre.
   
• Monitor that plan on an ongoing basis. If Canadian dollar fluctuations could have a significant impact on your business, monitor the environment, discuss with your advisor and make adjustments based on changes in your business needs.
   
• Build flexibility into your business model. Currency fluctuations and other unexpected expenses can catch small business owners off guard. Be sure your business can withstand temporary fluctuations in cash flow by having access to an emergency reserve fund, whether it is accumulated savings or a line of credit.

KEY POLL FINDINGS

Percentage of Canadian small business owners worried about the value of the Canadian dollar as it relates to their business, by region:

Percentage of Canadian small business owners who have not taken any steps to protect their business from the fluctuations in the value of the Canadian dollar, by region:

The poll was conducted by Leger through a Web survey from February 12 to 19, 2014 among a representative sample of 500 English- or French-speaking business owners or decision-makers in Canadian companies (not publicly traded or NGO) with 500 employees or less. The results were weighted according to region and number of employees to ensure a sample representative of the entire population under review.