The COVID-19 pandemic has brought about unprecedented challenges for small- and medium-sized Canadian businesses, and as the economy slowly reopens across the country, uncertainty about what lies ahead is keeping some entrepreneurs on edge.
Joshua Lipsey runs CORE, a Toronto-based boutique fitness studio with 4,000 clients. He’s concerned about the trajectory of his business and what it will look like to open his doors again once given the green light.
“We may have to change our business model,” he told BNN Bloomberg in an email.
Leading up to the pandemic, Lipsey and his team were working on strengthening their brand and class offerings, while planning to open a second location. However, once lockdown measures were put in place, these plans were put on hold and Lispsey had to lay off the majority of his staff.
“Luckily, we were able to pivot very quickly with our virtual training and classes, but we took a hit in our revenue because we were not able to offer as many classes online with staff layoffs,” he said.
While Lipsey appreciates the federal government’s efforts to help small businesses, he wishes there was more for those in the fitness industry.
“I don’t think they take into account the businesses that will have a much longer road back to recovery and industries that will possibly never recover from this,” he said. “In my industry, we needed more resources to open online fitness portals.”
According to the Canadian Federation of Independent Business (CFIB), which represents small- and medium-sized businesses, 12 per cent of business owners are looking at bankruptcy or winding down their companies.
“I don’t see any scenario under which we don’t come out of this with tens of thousands of business failures,” CFIB President and CEO Dan Kelly said in an email.
The federal government opened the Canada Emergency Commercial Rent Assistance (CECRA) last month, but the CFIB warns many businesses continue to report the program won’t help them because their landlord won’t apply, or they do not meet the revenue loss criteria of 70 per cent.
But Lipsey’s experience demonstrates that entrepreneurs are capable of being creative in difficult times. Even though there are longer-term challenges for his company, and some small businesses may not survive the pandemic, the outlook isn’t gloomy for everyone. Some experts say businesses could emerge stronger than before, and new waves of innovation could transpire.
For example, Dresst, a Toronto-based subscription clothing rental company, has seen business pick up after an initial drop-off at the start of the pandemic.
“With social distancing in effect, we did see a slowdown in rentals through April,” Laura Bryce, co-founder of the one-year-old company, said in an email.
However, in May, Dresst saw its revenue triple from April as Canada began to loosen lockdown restrictions. Bryce said the increase in e-commerce activity, combined with a desire among consumers to conserve cash while having access to trendy clothing, will open doors for the business going forward.
Then there are some businesses that have actually benefited from the pandemic altogether.
“The lockdown exponentially increased the demand for our services,” Ugochi Owo, the CEO of Flindel, a reverse logistics startup focused on automating commerce returns, said in an email.
And while many businesses had to change the way they were reaching their customers in March, Flindel was essentially business as usual.
“We are in a fortunate space at a necessary time,” Owo said.
With these types of positive stories, there is a sense among small business and startup experts that the economic fallout from the COVID-19 pandemic could set the stage for a wave of new and successful companies.
“Any period of adversity always brings in a new crop of entrepreneurs that will be able to build new businesses around whatever environment we find ourselves in,” CFIB’s Kelly said. “And I am confident that many existing entrepreneurs will pivot and find new approaches to do business.”
Former Bank of Canada Governor Stephen Poloz even addressed the issue last month, when he said the economic devastation caused by the pandemic could trigger a wave of innovation and company creation – something that needs to be nurtured.
Abdullah Snobar, executive director of startup incubator the DMZ, expects to see businesses that tackle some of the inefficiencies, gaps and opportunities exposed over the last couple of months to emerge and succeed post-pandemic. Some examples he provided include products and services that can be consumed virtually, and products that make working from home easier or make contactless delivery possible.
Snobar also noted that underrepresented groups face steeper challenges in this current economic climate.
A survey conducted by the Canadian Women’s Chamber of Commerce and Dream Legacy Foundation in April revealed 66 per cent of underrepresented and marginalized founders reported a decrease in revenue due to COVID-19, compared to other small businesses in Canada.
Despite this, however, Snobar is hopeful.
“The 2008-09 recession brought Uber, Pinterest, and WhatsApp into the world, among several other big players in tech,” Snobar said.
“That is the message we want to reinforce to any entrepreneur who feels discouraged at this time, and who is grappling with the uncertainty of the economy.”
This is the fourth instalment in 'The Evolution of the Workplace,' BNN Bloomberg's weekly in-depth series looking at how workplaces in Canada are changing due to the COVID-19 pandemic.