the end of covid-19 pandemic Sanctions and the upcoming economic recovery don’t mean clear skies for Canadian small business owners like Ryan Dunn.
Dunn and his wife, Polly, run Winchester Catering & Events, a business they bought four years ago in the small eastern Ontario township of Winchester.
As Ryan Dunn told Global News, the family had a year of normal operations before the COVID-19 pandemic struck in March 2020 — the month that marked the beginning of a rolling lockdown and intensified limits on gatherings like weddings and Winchester Catering For conducting and conducting routine business.
That new economic reality hit new business owners hard.
“I thought that was just going to be the end of it,” Dunn says, recalling how the family put most of their savings into the new business with the expectation that it would turn a profit within three or four years.
“But once the pandemic hit, I didn’t think we’d have to walk away from it before we were four or five months down the road.”
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But Winchester Catering & Events persevered. The property was backed by a mortgage from a private lender, which Dunne says was “very, very reasonable” on payments in the early days before government support rolled in.
Dunes converted the on-site hosted bed and breakfast into a long-term lease, and took on debt as a stopgap for the business’ other revenue holes. The family business carried over to cater corporate holiday parties in the winter with individually packaged turkey dinners.
“It was basically just me and my wife and my kids,” Dunn recalls. “They would be all over here doing turkey slaw and cranberry sauce portions and all that stuff and whatever else we could do. And we just managed to scrape by.
On the other side of the pandemic lockdown, Dunne says weddings haven’t been quite the same. He says that events where earlier 120-150 people used to dine are now regularly attended by 50-60 guests.
Above all, loans taken as a lifeline during the pandemic need to be repaid early. And with that mortgage needing to be renewed next year, interest rates are now at highs not seen in Canada in more than two decades.
Dunn says that renovation, on top of a slowly recovering business and outstanding debts, could end up being the “nail in the coffin” for Winchester Catering & Events.
“I think for most people the pandemic is over. But for people like me, we are experiencing a hangover,” he says.
Historic decline in self-employment
Recent surveys and data suggest that Dunn is not alone in facing renewed hardship in the aftershocks of the pandemic.
Latest Labor Force Survey from Statistics Canada Shows the country lost nearly 40,000 self-employment positions in May.
This is the biggest decline Canada has seen since the early days of the pandemic in April 2020 and the fourth biggest in the past decade, according to an analysis by BMO’s Benjamin Reitz.
Reitzes warns of reading too much into the data from the single jobs report. But he says that while the public and private sectors have seen year-over-year gains in Canada’s hot jobs market over the past year, self-employment continues to decline.
“Self-employment has remained depressed more broadly since the pandemic,” Ritzes told Global News.
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Perhaps counter-intuitively, Canada’s tight labor market may be part of the reason that fewer Canadians are choosing to go it alone or start their own businesses, he says.
With Canada’s low unemployment rate and a high number of vacancies at Canadian employers, workers may be less inclined to choose self-employment because they can find plenty of opportunities in the private sector, Ritz explains.
May saw Canada’s unemployment rate rise for the first time So far in 2023, that has risen from 5.0 percent to 5.2 percent, which was just above the record low. Reitz says additional weakness in the labor market is expected as the economy is projected to cool in the coming months, which could drive some out of their current jobs and entrepreneurship.
“Self-employment isn’t that attractive at the moment,” he says. “But we are expecting to see some moderation and that could lead to higher self-employment numbers in the coming months.”
Simon Gaudreault, chief economist and vice-president of research with the Canadian Federation of Independent Business (CFIB), says a tight labor market is not necessarily good for the economy, given the “very concerning” decline in self-employment.
The majority of employers in Canada are small businesses, Goudreault says, giving independent businesses a major impact on overall employment in the country.
“We need self-employed people, we need entrepreneurs. We need people who are willing to start things from scratch or people who are willing to be part of the business succession process,” he tells Global News.
The rise in unemployment, potentially driven by the recession that some economists have said in their forecasts for 2023, is not necessarily the solution to Canada’s self-employment woes, Gaudrault notes.
While some may choose to start a business or strike out on their own if forced to, others find opportunities in periods of economic growth when capital is more readily available and consumers are spending freely. they say.
“It’s hard to say (whether) self-employment will be driven by the recession or driven by the economic boom.”
Calls grow for more support for businesses on the edge
Gaudreault noted that many small businesses, such as Winchester Catering & Events, are still carrying debt from the pandemic. The CFIB calculation placed the average debt load at approximately $100,000.
Meanwhile, only 44 percent of these small businesses have returned to their pre-pandemic revenue levels, according to a survey of CFIB members in May.
Given the bleak outlook for the economically important sector of the economy, Gaudreault says he would like more government support for small and medium-sized businesses rather than funding designed to entice large foreign companies to set up roots in Canada. Want to see help?
“Perhaps what we need right now is governments acknowledging this more strongly and making sure that they are right when it comes to economic policies and Canada being a competitive place and the economy of the future. It’s not necessarily just about giants, but it’s about being small. And medium-sized players are able to compete with a more friendly business environment,” he says.
“Maybe when we have that, it will be a strong signal to people who are willing to take up a business or start their own and become self-employed.”
CEBA repayment deadline is approaching
Dunn, too, would like recognition from governments about the impact of the COVID-19 shutdown on businesses.
Despite public health imperatives informing government mandates, Dunne says it is unfair that little relief has been given on property taxes, for example, to businesses that were unable to generate revenue in a month.
“The fact was that they shut down our businesses. They didn’t give us a chance to build commerce, and yet they expect us to pay,” he says.
The federal government extended the repayment deadline for Canadian emergency business account loans by one year to December 31, 2023. Finance Canada did not respond to a Global News inquiry earlier this month on whether that deadline would be extended again to provide more relief amid pressure from the CFIB. for businesses.
Summer is looking great for Winchester Catering & Events, with weddings booking well into the fall. But Dunn says he knows when winter sets in, he will have to make tough decisions about the future of the business.
“I don’t like to think about the days when we start renewing our mortgage and our debt is due on all of our loans and stuff,” he says.
Asked if he’s considering calling it quits given the grim outlook, Dunn has a blunt response that may add to a big factor keeping Canadian entrepreneurs still in the game.
“No, I’m too stubborn.”