Home Month and Year October 2022 Business Adjusts Financial Planning

Business Adjusts Financial Planning

The slow but sure recovery


Of all the usual small business ups and downs and the consistent planning for growth, success and moving forward, the past 20 months of pandemic disruptions and challenges were a broadside like none other.

While all aspects of business were impacted, the uncertainty of financial planning and the unpredictability caused by pandemic lockdowns and disruptions was exceptionally challenging for small businesses.

“Businesses navigated an economy where they were forced to close their doors, allowed to reopen them, forced to close them again, allowed to partially reopen them, and so on,” says Jon Horsman, senior executive vice president of Business, ATB Financial and CEO of ATB Capital Markets. “There was constant change and unpredictability, in lockdowns, vaccination thresholds, vaccination records and certificates to QR codes, and outreach to staff and suppliers.”

Businesses adjusted their financial planning and did what needed to be done to maintain the business. “They found effective ways to survive the unpredictable environment of lockdowns and re-openings. They adjusted the financial planning and evolved their business models to accommodate the ever-changing economy. Restaurants, for example, using online platforms such as Shopify, DoorDash, SkipTheDishes, Uber Eats and moving to curbside pick-up and patios.

“And the astronomical rate at which businesses established their e-commerce, digital delivery and door-to-door distribution” he says. “They switched their focus and adapted.”

But it was a bumpy ride! According to Annie Dormuth, the Canadian Federation of Independent Business (CFIB) director of Provincial Affairs for B.C. and Alberta, the impact was significant, financial planning and the recovery may be slow and speedbumps will linger. “Alberta small businesses estimate it will take 21 months to fully recover from the pandemic, at the current recovery rates. Long-term business confidence has seen a mixed bag of reactions and that may be a testament to the high degree of uncertainty in the economy overall. It all impacts a business’ plans to hire and expand,” she explains.

“Right now, Alberta small businesses are still experiencing a tough uphill battle to economic recovery. Late last year, around 20 per cent of Alberta small businesses were actively considering closing or claiming bankruptcy, because of the pandemic’s impact on businesses.” She highlights the CFIB Business Closure Report which estimated that 34,500 Alberta small businesses were/are at risk of closing. “CFIB is carefully monitoring the three indicators of small business recovery: fully open, back to normal staff levels and sales. As of now, Alberta small businesses have a long way to go to reach normal sales levels.”

The good news, on a human, employer and employee level, is that 45 per cent of Alberta businesses say they no longer experience high stress and anxiety levels due to the pandemic.

There is business consensus that recovery has begun and business financial planning needs to be in synch. Encouragingly, when it comes to business financial planning and post-pandemic operations, there are small business silver linings in the dark pandemic disruption clouds.

“Last year, we had the positive of new business formation, as the number of Alberta incorporations rose,” Horsman notes. “We saw people starting businesses during the pandemic and pursuing innovative and creative entrepreneurial avenues. We also saw a shift to online sales and services with businesses adapting to an economy where more customers were looking for an online experience and, of course, there was definitely an upsurge in remote working.

“The affect on people and the labour force was significant. People who worked in directly-impacted industries like restaurants and retail, had to find new jobs that were less volatile. This dislocation ultimately has driven the labour shortage as higher impacted industries struggle with the unpredictability of the openings and closings,” he says.

According to an ADP Canada commissioned survey, staffing and salaries are key factors in the financial planning of businesses.

“As organizations struggle to attract and retain workers,” cautions Helen Vesce, ADP’s division vice president of service delivery. “Some 46 per cent of small businesses owners and operators say hiring in the current environment is difficult, even with increased wages, more than 27 per cent having increased benefits like additional vacation time, and about 20 per cent introducing shorter work weeks. The majority of small businesses who had to reduce their workforce in response to the pandemic have been able to re-hire employees.

“In addition to attracting new employees, challenges also exist in keeping the ones that small businesses already have on hand. The response of small business owners surveyed says that 32 per cent of staff leave for a better salary, wanting to make a career change and to take on a more senior role.

“The findings highlight the strength of small business,” she says. “After weathering an unprecedented storm, they are making a comeback. The financial planning for the recovering new normal indicates that businesses who are able to adapt to the changing demands of this new labour market are poised to come out ahead in the search for top talent.”

Horsman explains that businesses had to keep pivoting their operations and responses. It was a scramble for business to do financial planning, closing and reopening their doors, building back customers, letting staff go and rehiring and moving to more digital offerings.

Dormuth points out that, even with focused financial planning, “Long-term business confidence is seeing a mixed bag of reactions, likely a reflection of the high degree of uncertainty in the economy overall. It all impacts a business’ plans to hire and expand.”

She emphasizes that, while business is re-jigging its financial planning, government also has a role to play. “CFIB is asking all governments to place small business economic recovery as a top priority. This includes not introducing new or additional new costs on small businesses, reducing red tape and ensuring fair and equitable taxation for small businesses.”

Although it’s the new year, there will be business changes made during much of 2022.

ATB surveys show that, in many cases, business owners need to decide if they should take the capital from their business, or reinvest it, now that the pandemic panic is over. A number of business owners took the money, built a great business, converted the business back to cash during the economic shutdown and took the opportunity to exit as a great business.

“The businesses that re-invested their capital to move forward had less competition and structural demand growth, which, for some, led to better profit margins,” Horsman points out. “The last couple of years have provided business owners with the opportunity to identify and eliminate unnecessary costs from their businesses.

“Businesses were forced to assess their operations and only maintain, preserve, continue with what was core and fundamental. Extraneous services and costs that weren’t creating value were removed, businesses were in survival mode and had to hone in on only that which was required and that which their customers wanted.

“We have advisors that specialize in different sectors of the economy, like energy, agriculture, etc. and they provide expertise to their clients on how to pivot their financial planning and their operations to best adapt to the new business realities.”

There’s an important key to moving forward. Horsman urges: “Maximizing successful financial planning means not going back to doing business the way you did before the pandemic happened. We must continue evolving and adapting.”

At the time of the interview Jon Horsman was employed at ATB. He has since moved on to other opportunities.