Economists hypothesize that small businesses and startups profoundly influence economic growth, how come?
Starting a small business is like asking a girl out for the first time, get rejected once and you suddenly become discouraged to do it again. With that being said, many gutsy entrepreneurs have followed through to becoming not only a successful small enterprise but also a major contributor to the economy. These contributions come in the form of offering support to larger corporations, fostering innovation, and growing Canada’s national income along with gross national product (GDP).
The central truth of our business ecosystem is that small and large companies exist and are mutually dependent on each other. While it might seem as if the jumbo firms could do without the tiny shoestring operations, their need for outsourcing research and creative ideas come from much smaller, nimble businesses. As an example, one of the strategies that IBM looks to expand is to maximize the value for small and medium business enterprises through acquiring smaller innovative computer hardware and software companies and startups. By doing so, they take on the task of commercializing and marketing these great ideas.
As a result, these small companies create new jobs and the country’s unemployment rate decreases. Meanwhile, an increase in the competition ultimately causes business owners to look for new markets outside of their domestic sphere. Thus, generating foreign revenue coupled with increasing the country’s GDP and prosperity as a whole. The success of small businesses contributes to healthier national income in the form of higher tax revenue resulting in higher government spending. In essence, this revenue is used by the government to re-invest in new or struggling sectors of our economy.
The Challenge for SMEs
Most big businesses start off small. The government, CPAs, lawyers and financial advisors along with other essential industry consulting groups have a responsibility to assist in developing the conditions necessary to cultivate successful, world-class companies here in Canada. As well as, keeping them here while they tap into markets across North America and around the world.
Just like getting into a serious relationship or marriage, small business ownership is not for everyone, especially when it comes to managing financial assets and the allocation of these assets to balance risk and rewards. A small business owner takes on a lot of risks themselves – whether it be putting up hard-earned cash, a house, or taking out a loan to facilitate their promising ideas, and most painful of all, possibly going on little to no income initially. The rewards, however, could be potentially very high, mainly if a larger firm outsources its products or services, and that should be something not to take for granted.
Often it makes sense for small and medium enterprises to align with the resources available from larger corporations, which offer financial strength and robust marketing infrastructure. Challenge or not, SMEs should be given our full attention and support, both from government tax incentives and the professional services industry that guide them. Large corporations understand this as they look to their younger sister businesses for new and innovative ideas, whatever the cost.
About The Author
Gino Scialdone is a financial advisor and the owner of Black Spruce Financial, an independent wealth management firm serving independent business owners. Having grown up in a family business and owning a business himself, Gino has a unique understanding of the challenges and needs business owners face. Offering a comprehensive array of wealth management and financial planning services, he strives to provide sound and creative strategies that meet a business owner’s short and long-term needs. Based in Toronto, Gino serves clients throughout the greater Toronto area and southern Ontario. To learn more, connect with him on LinkedIn, Facebook or Twitter.