Almost one third of Canadian small businesses plan to increase staffing over the next six months, according to the American Express Small Business Monitor published today.

Seventy per cent of survey respondents said they were confident that their business would improve over the next six months. (This is another show of optimism from the Canadian small business sector. More than half reported their financial status as good and said they expect to see some improvement in their own businesses over the next half-year in a recent Staples poll.)

Despite the challenges that the downturn presents, 76 per cent of business owners said that the rewards and opportunities from running your own business outweigh the risks and challenges. The study found that many business owners are taking proactive steps to protect their cashflow, employees and take risks necessary to support their businesses.

Worry off-sets some of the optimism

Many small business owners have a mixed outlook for their businesses, with their optimism balanced by the reality of the current recession. Business owners surveyed reported the following concerns:

• 42 per cent are worried that things will get worse before they get better;
• 26 per cent indicated concerns about meeting payroll;
• 25 per cent have stopped taking a salary;
• 25 per cent have invested personal funds to support employees; and
• 5 per cent are worried about going bankrupt in the next six months.

Few layoff expected

Almost one in three businesses are prepared to invest in the retention of talent. Thirty per cent of respondents said they would continue bonuses and 28 per cent will continue to offer pay raises.

Only 17 per cent have had to lay staff off to date. Twenty eight per cent expect to hire over the next six months while 8 per cent expect to lay staff off.

Cash flow management strategies

Small businesses are also using the following proactive strategies to cut costs and manager their business during the downturn:

• cutting back on expenses (60%);
• curbing personal spending (48%);
• increasing customer value (46%);
• hiring freeze (38%);
• salary freeze (34%);
• investing personal assets in the business (34%);
• re-evaluated supplier relationships (29%);
• introduced flexible work hours for employees (26%);
• stopped taking a personal salary (25%); and
• reduced employee hours (25%).

Moderate risk taking planned

The survey found that more than 80 per cent of small business owners are still willing to take a certain degree of business-related risks. Examples include:

• investment in new equipment or other capital expenditures (52%);
• use of personal assets to cover costs (32%);
• use of a line of credit or bank loan to pay creditors (30%);
• extended payment terms for customers (18%); and
• devotion of additional capital to salaries (15%).

Small business owners say they are also spending more time managing their existing customer relationships and doing more to offer greater value to their customers. Many are rethinking their product offerings and innovating product lines to stay ahead of competitors.

"Although two-thirds of those surveyed consider themselves 'stressed out' about their current financial position, it is enlightening to see that they believe they can weather the storm and are willing to invest in their employees and their business model," said Howard Grosfield, VP & General Manager, Small Business Services, American Express Canada & International.

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