Recovery, where art thou?

That, it seems, is the question Canadian small businesses are increasingly asking as they fail to see the "promised" economic recovery hit their bottom lines. The latest American Express Small Business Monitor found that Canadian small businesses are increasingly unwilling to take risks.

Just 16 per cent of Canadian small business owners say they are willing to take "significant" or “above average" risks, which is down from 25 per cent from a year ago. What's more, only two per cent of respondents said they are prepared to take on "significant" risk.

"Small business owners have been patiently waiting for business to pick up," says Eric Nielsen, vice president and general manager, Small Business Services Canada, American Express Canada, "but our quarterly monitor suggests that, for many, the reports of recovery and anticipation of a market upswing have yet to fully materialize."

Concern heightened while fortunes improve

Interestingly, while small businesses are now more concerned about taking on risk, almost one third of businesses said their business had improved. In contrast, 41 per cent reported a decline, which is down from 50 per cent reported in January 2010. Twenty-eight per cent said their business is experiencing no change.

"The positive to take from this is that at least most small business owners are feeling that their situation is more stable, even if they are reluctant to make big moves until they actually feel the impact of an economic recovery taking hold," said Amex's Nielsen.

Lack of hope connected to risk aversion

Before taking significant risks, a business must feel there is a good chance of a significant reward, something small busineses in Canada do not seem to be expecting at this time.

Optimism amongst small businesses has dropped eight points since last year, with just 47 per cent of respondents "hopeful" that their financial position will improve.

Compared to just three months ago, small businesses are less willing to make significant capital investments, use credit lines to pay creditors or extend payment terms to customers.

Stability driving business mandates

For more than a third of respondents, maintaining their current business is their top priority.

Growth is the main priority for just 28 per cent of businesses and being innovative was the main priority for 14 per cent of businesses.

Financing growth plans and innovation also seems to be on hold for most small businesses. Just 23 per cent of businesses have sought new or increased credit in the last six months.

Another shift is that small businesses are now less likely to "strongly agree" that the rewards and opportunities of owning their own business outweigh the risks, which has dropped to 30 per cent, down six per cent since last year.

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