Recently, the Canadian economy has been very strong compared to our friends to the south. However, all good things must come to an end and this may mean the start of a - albeit brief - recession.

Unfortunately, most small business owners in Canada are not prepared for a downturn, as they do not have any plan in place should the economy dip, according to a new survey.

Ninety-two per cent of respondents of a new survey, claimed that their business can withstand any financial problems and of these over 66 per cent do not have a contingency plan, said a Harris/Decima report from BMO Bank of Montreal.

"While it's encouraging to see such optimism among small business owners, a contingency plan should be of paramount importance particularly in times of economic volatility," said Gail Cocker, Senior Vice President, Commercial Banking, BMO Bank of Montreal. "From our experience, the best time to develop and review contingency plans is during good times rather than scrambling to adjust during a sudden downturn."

However, many business owners believe there is no need for a plan and 79 per cent think that the Canadian economy could be described as 'good,' or 'excellent.'

It is interesting to note that businesses in western Canada are the most likely to have a plan in place, with almost half reporting that they have some kind of back-up plan should times go bad. However, the Western businesses are also the most likely to think that Canadian economy is currently stable.

In Ontario and Quebec confidence in the economy is lower, but so is the use of a contingency plan. Nation-wide a quarter of respondents think that the rising Canadian dollar had a positive impact on the bottom line. This is compared to 51 per cent of respondents in the Prairies.

While we have been hearing about Canada following the lead of the U.S. and entering a recession, only 2 per cent of respondents from western Canada and 7 per cent in Ontario, say Canada is currently in a recession.

Recession or not, a contingency plan is always a good idea for a small business, as it helps you be prepared for any drastic change in the economy. Most businesses that have a plan in place use their savings to cover the cost of a slide.

"With the strong Canadian dollar, small business owners, especially those in the manufacturing sector, are being impacted," said Ms. Cocker. "A good plan should consider a number of scenarios with focus on day-to-day business operations and include a clear strategy on how to execute the plan in a timely manner."

Coincidently, BMO Economics believes that Canadian small businesses will fare much better than those in the United States.

"Canadian retail businesses are generally in solid shape, with consumer spending strong across the country, in stark contrast to the darkening U.S. outlook," said Doug Porter, Deputy Chief Economist, BMO Capital Markets. "This has played a key role in keeping Canadian employment conditions robust."

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