Bridgitte (00:02):
Welcome back to another episode of GVPOD Greater Vancouver's Business podcast, where we explore the challenges and opportunities facing our region. I'm Bridgitte Anderson, president and CEO of the Greater Vancouver Board of Trade. October is Small Business Month, an opportunity to celebrate the impacts that small businesses make in our communities and in our economy. And this series is brought to you by our pillar partner, RBC. Today we are joined by Curtis Campbell. He's the Vice President Business Markets BC region at Royal Bank, and he is responsible for leadership and direction of Royal Bank's small business market in BC. Welcome, Curtis. Nice to have you here.
Curtis (00:42):
Great. Thanks Bridgitte. It's good to be here and a happy Small Business week
Bridgitte (00:46):
Indeed. So you've been with RBC for a long time, almost 30 years. Maybe first tell us more about your role with the bank and how you work with small businesses.
Curtis (00:57):
Yeah, for sure. Thanks so much. So as you mentioned, I am responsible and lead the small business segment on behalf of the Royal Bank. So I've got oversight over, call it 130 or so employees spread right across the province. And our role, our obligation is to work with small businesses in all the communities in which we live and work to try to enable their prosperity and success. So yeah, it's a lot of hard work and rewarding work as you can imagine. Small businesses, big and small, they got a lot of stuff going on. So that's our responsibility and obligation to be a good, solid, trusted advisor to our business owners and entrepreneurs.
Bridgitte (01:42):
You say a lot of stuff going on and I couldn't agree more. I mean, you just think about the affordability challenges. I mean they're very well talked about when it comes to families and individuals, but the kind of affordability challenges and the economic headwinds right now facing small businesses are pretty significant. So given that you've been in the role as long as you have, I'm making it sound like you've been there a hundred years, but you've been there for 27 years, which is a long time and you see a lot of different cycles in the markets. How does the bank's approach now change to previous years in working with entrepreneurs and small businesses?
Curtis (02:21):
I don't know that our approach changes a whole bunch because our approach fundamentally is that of advisory service. We're there to consult with our clients to provide advice, to be of service, not to tell them how to run their business. That's always the privilege of the business owner and entrepreneur to make decisions about their business. But certainly what we hear from a lot of our clients is help me digest through the set of circumstances that we currently are living through and provide some valued advice. And so you're right, we are in a bit of a down cycle and
Bridgitte (02:57):
Ahem
Curtis (02:57):
Those of us who've been in business a long time, you tend to see cycles go up and down. But what really doesn't change in terms of our approach is just how we have that face-to-face, person to person, back and forth, dialogue with our business owners to help them sort through whatever the current day challenges and opportunities are so that they can enable their businesses to the best of their ability.
Bridgitte (03:18):
What are some of those challenges and opportunities that stand out for you right now? I mean, I know that our members are telling us high inflation, the rising cost of business inputs, those kinds of things, and maybe those are the biggest challenges that you're seeing, but are there other additional challenges that small businesses in particular are facing right now?
Curtis (03:37):
You hit on a couple of the big ones that are off mentioned in the media anyway, inflation and interest rates, the input costs to businesses are obviously higher as well as the cost of capital as represented by interest rates is higher. And again, these are cyclical. It's just the bad part of the cycle right now, but not unprecedented for those who've been in business a long period of time. I would say for small business in particular, they're grappling with a little bit more of a regulatory tax burden than what they've seen in the past. And again, this is not a surprise. We know where this came from is cycling out of the pandemic. Governments enacted some policies and ideas that were focused on worker health, enabling workers and keeping more people employed. And perhaps that comes across as a bit more of a burden to the business owner to operationalize these policies. So that probably inordinately hits the small business a bit harder than some of the larger businesses out there. And then employer, or sorry, employee availability.
Bridgitte (04:51):
Yeah, certainly what we've been hearing from our members, going back to the costs, you might be aware that we produced a report back in May about the cost of doing business, and we just took a pretty narrow scope in looking at government imposed costs over a two year period and found six and a half billion in additional costs imposed by government to businesses, which is pretty staggering for those small and medium businesses. But when you're talking to these small businesses, knowing that they have been in facing increased costs due to pandemic inflation, rising interest rates, how can these small businesses adapt to these economic conditions? What do they need to be doing differently?
Curtis (05:33):
Yeah, great question and it comes up all the time as we consult with our business owners. The first thing for business owners and their advisors to stand back is to diagnose the problem. What's the source of the problem to come up with a strategy? And so is the burden of costs, something that can be and influenced through sales growth, through pricing strategies. Sometimes the costs can be defrayed by the business owner accessing new markets, growing their top line sales, sometimes through passing pricing increases along to their end users if their demand is sustainable. And for some businesses, they're seeing some weakening demand. So the ability to pass along price increases may be a bit limited. So again, diagnosing the problem, is it something that can be fixed through growing sales or is it more of an expense issue? And so a business owner needs to take a look at their cost structure and do they have high fixed costs, which really they may not be able to do much about, which is their rental and premises costs and taxes and that sort of thing.
(06:49):
Or are there variable costs, labor costs, some input costs, interest costs. If they're carrying high debt loads, maybe paying down debt can reduce their variable costs. So the business owner has a few levers at their disposal to take a look at their business and try to understand is it something that can be fixed through growing the top line or controlling the bottom line. And once they've done a bit of a diagnosis from that point of view, then setting a strategy in terms of riding the ship and restoring the business to stronger profitability is a lot easier.
Bridgitte (07:25):
Yeah, good point around diagnosing the problem because depending on what sector and industry they're operating in, it could be a number of different issues at play and you can't really find the solution until you know what the real problem is. I heard somewhere recently that up to half of small businesses fail within the first five years or so, something like that. I think I've got it right. Are there a couple of main reasons why, what happens in those first years that the strategy doesn't really work?
Curtis (07:55):
Yeah, I don't know that that statistic has really changed a lot over the course of time. Small business is not for the lighthearted. It does take a person who's got some strong orientation towards risk and self-confidence. It's often reported you just can't take an entrepreneur down. You can put barriers in front of 'em and the confident risk. Yeah, risk oriented entrepreneur, they'll find a way through, right? As much as sometimes government regulation puts up some barriers. So yeah, the landscape of businesses that may find some trouble making it through the first 2, 3, 5 years has been pretty consistent over the course of time. And so what does help entrepreneurs is understanding their market, understanding their customer. Sometimes the entrepreneur, they've got a good sense of what they do in terms of providing a durable good or a service, but being aware of how the market may change, how client expectations may change, and you can have a business that's doing a great business today, and then for whatever marketplace dynamics, their client base, all of a sudden shifts and now they're not providing the good or the service in a way that the clients want.
(09:25):
I provided a bit of an example of that. We never used to see Starbucks. They had the living room concept, kind of the third space where we would go in and have our coffee and sit down and chitter chat and all the rest of it. And the demand dynamics totally changed. People aren't going in and just liaising around the Starbucks not so much anymore. They want the coffee now. So now we see Starbucks with drive-throughs, and we go in and get our coffee and we're on our way. So of course that's using an extreme example. Obviously Starbucks knows their customers and has all the analytics for it and was able to pivot. Small businesses may not have the same insights around what their clients are up to than what big businesses are. But again, that's where small businesses need to surround themselves with a good set of advisors that can provide some insights and some data that helps 'em understand as their customer base may change and as their demand dynamics may change, how the businesses themselves may need to change.
Bridgitte (10:26):
And pivot was really the key word for so many small businesses in the last couple of years. I mean, who would've thought the kind of changes that we've seen come to be patios outside in the middle of a rainy day in Vancouver, or going there to pick up not only your meal, but a bottle of wine and maybe a roll of toilet paper too. It was a lot of pivoting, as you say. I want to ask you about the report. I was really surprised by this report that RBC did that suggested that younger Canadians aren't really gravitating toward entrepreneurship in the way that they were before. That's a little concerning because we need entrepreneurs and we need small businesses. In British Columbia, small businesses employ about 1.1 million people, so really important their fabric of our community. What was behind that? What are we seeing in younger Canadians that maybe they don't have the risk profile that you were talking about?
Curtis (11:21):
Yeah, yeah, it's a great point. And that report just came out a couple of weeks ago. So I speak from the bias of having been a small business owner. So before I joined the bank, I ran two small businesses, neither of which exist today, which is fine. I guess I'm part of the statistics of small businesses that,
Bridgitte (11:39):
But you've been there, you know it.
Curtis (11:41):
I've been there. And sometimes it's okay, right? Sometimes it's not a tragedy that we closed down a business, which was the case in my sense. But yeah, a couple of things. I would say, first of all, how times changed. There was a report published by another financial institution just as recent as 2018, and the title was a Nation of Entrepreneurs. And we had just seen the greatest number of new businesses opened in decades and all this positivity and hope for the future that again, as a nation of entrepreneurs, that small business would be the economic engine driving us forward. And I don't think that that's disappeared. Fundamentally, the entrepreneurial spirit is still held out there by a lot of folks, and certainly for a lot of the new immigrants that come to Canada. There are nations out there that are very entrepreneurial nations. So I think there's some tailwinds that we will see in terms of entrepreneurialism moving forward. But getting back to your question around some of the fundamental characteristics, we do need our young folks who have a sense of boldness around
Bridgitte (12:52):
Ahem
Curtis (12:53):
To be an entrepreneur, to want to go out there, not necessarily with a proven roadmap and provide goods and services to awaiting audience, requires some boldness, requires some risk taking, requires a good sense of self-confidence. And I question whether these qualities and characteristics are really prized in society and in certain societies. Again, some of our new immigrant populations coming to Canada. Absolutely they are. The other part is I think about what are the skills that we're teaching youth either through institutional educational programs or otherwise, people skills, financial skills, marketing skills, leadership skills, operational skills. These are all disciplines that youth need to possess in order to have some confidence to be able to say, okay, instead of working for somebody else, I'm going to start my own business and see how it goes. So there's certainly something to be said about skill development and making sure that the curriculum, again, whether it's institutional educational programs or post-secondary, are helping our youth develop those skills that are really necessary for entrepreneurialism. And government can certainly play a part in ensuring that our curriculums are up to date there.
Bridgitte (14:19):
Yeah, I was just going to say, I think government has a role to play. I mean, they have a role to play in creating the business environment that can really foster innovation and investment, but also foster that spirit of entrepreneurship. And given the report that we produced, certainly they've got some work to do on those government imposed costs, but what are some things that government could really do to help alleviate some of the pain points that you're seeing for small businesses?
Curtis (14:45):
Yeah, you kind of said it is my view and shared, I'm sure by a lot of business owners is we would hope that government sets the environment. That's the role of government, set the environment and a predictable environment with policy, with legislation, with taxation, posture, that sort of thing, and keep it somewhat consistent, low and consistent would be great, but let's at least have consistency
(15:12):
And then leave it to the business owners, leave it to the entrepreneurs, business owners and entrepreneurs. They can find the opportunities. They can walk down the street and point out a business opportunity that a non entrepreneurial person just wouldn't even see. And so given the right type of environment, the climate where innovation can thrive, the business owners, they'll bring the capital or they'll marshal the capital if they don't have it themselves and come forth with the innovative ideas that can create the jobs and create the social prosperity that the government really wants. Let's face it, the government wants social and economic prosperity. We would just hope that the government sets the environment and allows the entrepreneurs to take care of the rest. So certainly a consistent regulatory and legal environment that features low taxes and low economic burden would be great. And I think if I'm speaking freely, the government probably needs to take a look at the taxation regimen that they've got for small businesses, and there's some relief there that should come across to the small business owners because we're a nation of small business that small businesses employ. And I don't know what the stat is off the top of my head, but it's a large percentage of jobs in the Canadian economy. So government could be more helpful in bringing through a bit of a lower tax regimen and maybe lighten the regulatory burden as well.
Bridgitte (16:39):
Yeah, that's an issue that we champion for what we have for a very long time and continue to champion. But this latest report, I think, really shone a light just on the kind of costs that are facing small business owners. And I think, as I said, there's a lot of awareness about the affordability challenges for families and for individuals, but when we're talking about small businesses, that actually can be a family business quite often it is, or it can be one or two people. And so understanding that those are really important jobs and the private sector to have a really healthy economy and a healthy community, you have to have a thriving private sector as well. So it is something that we will continue to advocate for. I wanted
Curtis (17:24):
Absolutely. We're there with you.
Bridgitte (17:25):
Yeah. Great. So we understand there's a lot of challenges, tough economic times, there's no question about that. But when you think about the opportunities that exist for small businesses, what are you seeing maybe in the last few, maybe the last year or two or three coming out of the pandemic, what would you say that you've learned that you could pass on to those small business owners that are maybe just starting their organizations right now, or maybe they're looking to expand?
Curtis (17:55):
Yeah. What we see is there's a thirst for wanting to own and operate their own business. There just isn't always the knowledge or the capacity to be able to do all things. The number of times that we've met with a business owner or entrepreneur who's got a great business, they provide a great good or are terrific service, but they're just unclear in how to navigate some of the challenges, whether they're financial challenges or operational challenges or staffing challenges, advice to business owners is don't suffer. Stick up your hand,
(18:31):
Get involved with trade associations or the boards of trade, respective boards of trade or chambers of commerce, that sort of thing, and go seek out those entrepreneurial neighborhoods where there's folks just like other entrepreneurs that are dealing with the same issues, dealing with typical advisors, whether it's the banker's, lawyers, accountants, we've all got some part of advice to present to the business owners to help them along as well. And just recognize that business is a cycle. And right now we're in a cycle where by government policy, they're trying to bring down demand. High consumer demand is the reason for inflation. And so the higher interest rates, the higher cost of capital is designed to bring down demand. And so business owners need to be aware that if they're seeing a softening of demand, that's kind of by design. And so they need to orient their business to take that into account because a softening demand is probably with us for a little bit.
(19:35):
And as I said, the cost of capital is higher by virtue of interest rates. And so that doesn't mean there isn't capital and speaking on behalf of my institution, we're certainly lending as much as we ever did. We're not curtailing that. But business owners need to understand what the economic equation is for their business. And if the cost of capital is higher, then they got to work that into their equation as they try to find their way to profitability. But there are good opportunities out there. And I'd give an example of a business owner that we met earlier on this year, and actually they're a finalist in the Canadian Women Entrepreneurs Awards, which is sponsored by RBC, and she runs a series of travel medical clinics. And I would say the success for her in amongst an environment that is challenging, as we've described before, she knows the strengths of her firm, of her staff.
(20:34):
She studied the market to understand what is the travel medical clinic demand out there amongst the travel goers, those that would seek to be traveling around, brought in advisors and undertake measured expansion and not growing too quickly. Sometimes that stresses out a business, but to undertake measured expansion has allowed her to really thrive and really expand in an environment that's probably challenged some of her competitors. So yeah, there's absolutely successes out there. As I said, it's tough to bring an entrepreneur down, but they do need some help and support in order to find their way to success.
Bridgitte (21:12):
Well, I know larger organizations have larger teams. They have boards of directors and that kind of thing. And so as a small business owner, so important to use your advisors like yourself to really help get that expertise right.
Curtis (21:26):
Yeah.
Bridgitte (21:27):
Well, Curtis, this has been a fantastic conversation and I think really important details and advice for small business owners, and I just want to thank you for your time today,
Curtis (21:39):
Bridgitte. It's been a pleasure, and we're all here to enable business large and small, and let's grow the prosperity of British Columbia.
Bridgitte (21:47):
Absolutely. Hear-Hear, Curtis Campbell, thank you for joining us on GVPOD and thank you again to the sponsor of our small business series RBC.