Despite scarce talent, Ottawa entrepreneurs primed to invest in 2018: BDC

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“Optimistic” Ottawa entrepreneurs intend to invest more into growing their companies than the provincial average in 2018, according to a report from the Business Development Bank of Canada.

The bank’s annual report surveying Canadian entrepreneurs’ investment intentions predicts a slight drop for small-business spending in Ontario, but vice-president of research and chief economist Pierre Cléroux says Ottawa is likely an exception.

“I think it’s going to be more positive in Ottawa than in Ontario in general,” he tells OBJ.

BDC has a sizeable local portfolio that includes Klipfolio, Fusebill, Agrisoma Biosciences and CENX. Cléroux says he recently spent a few nights in Ottawa sitting down with local entrepreneurs and left the city with an impression of confidence.

“People are quite optimistic in Ottawa,” he says.

Nationally, the BDC report projects $140.5 billion in planned investments from small and medium-sized businesses this year, 2.9 per cent more than in 2017. Ottawa benefits from the same conditions that are giving the rest of Canada confidence, Cléroux says, such as expectations the economy will continue to grow and a low dollar that’s encouraging exports.

Pierre Cléroux is vice-president of research and chief economist at BDC
Pierre Cléroux is vice-president of research and chief economist at BDC

But Cléroux believes Ottawa also has a few unique advantages. For one, a strong housing market in the city keeps costs affordable. Increased government spending is also disproportionately benefiting Ottawa companies, Cléroux says – startups’ capital advantage of having the feds in their own backyard.

Talent problems persist

Ottawa companies also face the same barriers to growth that fellow Canadian firms do – namely, talent.

“You need to find people to work for you, and that’s the No. 1 challenge for entrepreneurs in Ottawa,” Cléroux says.

“You need to find people to work for you, and that’s the No. 1 challenge for entrepreneurs in Ottawa,”

Finding skilled labour has long been an issue for Ottawa entrepreneurs, who have repeatedly listed talent as their top concern in the annual Ottawa Business Growth Survey. Unemployment rates in both Ontario and Quebec are at near-record lows, giving local firms a diminished pool to draw on.

Cléroux says businesses are instead hiring untrained workers and teaching them skills on the job. Nationally, the BDC report says intended investments in employee training are up to $20.4 billion in 2018, an increase of nine per cent over last year.

Perfect storm for acquisitions

The biggest uptick in this year’s BDC report is entrepreneurs’ appetites for acquisitions. Businesses intend to spend $18.4 billion to grow through acquisitions this year, a 79 per cent increase year-over-year, and Cléroux says Ottawa is no different.

A growing economy and an aging population make this the perfect year for acquisitions, he says. Baby-boomer entrepreneurs are increasingly looking to retire and exit the businesses they started, adding supply to the demand. The strong economy means they’ll be able to get a good price for their companies, Cléroux adds, which might encourage them to strike a deal with growing businesses.

“It’s a very different trend; we haven’t seen that in the past,” he says.

Regional disparity

Though Canada’s entrepreneurs are generally primed for investments this year, a few hot regions are leading the pack. Entrepreneurs in Alberta, Quebec, B.C. and the territories are all increasing their intended investments this year, while businesses in Ontario and the rest of Canada are trending downwards.

In the coming months, small businesses across the country plan to spend more on intangible assets – including intellectual property, research and development and employee training – and less on buildings and equipment.

Cléroux says the report paints an overall rosy picture of the country’s economic confidence.