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THE BUSINESS RESEARCHER NEWSLETTER ARCHIVES

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September 3, 2003 Volume 6, Number 7

CONTENTS

*
Introduction - Editor's Comments

* What's New at www.gdsourcing.com

* Statistics Canada releases

* How Accurate is Your Business Plan?

* Will My Business Survive?

* Small Business Stats Facts

For data table spacing, this newsletter is best viewed in Courier 10

 

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INTRODUCTION - EDITOR'S COMMENTS

Hello,

Just like that and the summer is over! I hope everyone had a good one.
I know we did!

Although there was no issue of the BR Newsletter this summer, we have not
been loafing the whole time.

As proof see our article on the state of small business in Canada in the
current issue of Small Business Canada magazine. Also see the current
feature article on the Small BizXpress web site:
http://smallbizxpress.tpl.toronto.on.ca/servlet/ArticleCont
(You can see a picture of me there as well!)

On the GDSourcing web site we have added two new features.  First is an
up-to-date archive of the BR Newsletter.  You can now view all issues online
back to January 22, 2001. http://www.gdsourcing.ca/newsletter.htm#index106

We have also added a new bankruptcy database that will provide you with the
number of bankruptcies in your industry in 2002.  For comparisons purposes,
it also includes the total number of businesses.  You can use it free of
charge at the following address: http://www.gdsourcing.ca/Bankruptcy.htm

I hope you find this issue helpful.

John White
GDSourcing - Research & Retrieval
 

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WHAT'S NEW AT WWW.GDSOURCING.COM - ROLLER COASTERS & WEATHER, MINING & ALUMINIUM & HOTELS



THE COASTER ENTHUSIASTS OF CANADA
Site: http://cec.chebucto.org
Site Summary: http://www.gdsourcing.ca/works/Coasters.htm
Statistics for currently operating Canadian roller coasters.


THE WEATHER NETWORK
Site: http://www.theweathernetwork.com
Site Summary: http://www.gdsourcing.ca/works/WeatherNetwork.htm
Current weather and air quality conditions across Canada and around the
world.


THE MINING ASSOCIATION OF CANADA
Site: http://www.mining.ca
Site Summary: http://www.gdsourcing.ca/works/MAC.htm
Mining in Canada: Facts & Figures


PANELL KERR FOSTER
Site: http://www.pkfcanada.com
Site Summary: http://www.gdsourcing.ca/works/PKF.htm
Monthly highlights for hotel occupancy rates in Canada


ALUMINIUM ASSOCIATION OF CANADA
Site: http://aac.aluminium.qc.ca
Site Summary: http://www.gdsourcing.ca/works/Aluminium.htm
Canadian Primary Aluminum Production


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STATISTICS CANADA RELEASES

The following statistics were released by Statistics Canada over the last
two months. We have listed those releases we feel are of the most interest
to Canadian entrepreneurs.

Very few of these statistics are available on-line. The URL listed is a
direct link to the press release associated with the data. It provides
contact and ordering information.

If you want to purchase any publication related to these releases please see
our web site: http://www.gdsourcing.com/works/StatCan.htm

We offer a 20% discount on most Stats Can publications and a 10% discount on
Stats Can electronic products. For more information you can reach us at
contact@gdsourcing.com. Put "StatsCan" in the subject line of your e-mail.


AGRICULTURE

Principal field crop areas
2003 (preliminary)
http://www.statcan.ca/Daily/English/030626/d030626a.htm

Canada-Mexico agricultural economies and trade 2002
http://www.statcan.ca/Daily/English/030722/d030722b.htm

Total income of farm families 2000
http://www.statcan.ca/Daily/English/030707/d030707d.htm



ARTS, CULTURE & RECREATION

Film, video and audio-visual distribution 2000/01
http://www.statcan.ca/Daily/English/030704/d030704b.htm

Sound recording 2000
http://www.statcan.ca/Daily/English/030707/d030707b.htm

International trade in culture goods 2002
http://www.statcan.ca/Daily/English/030709/d030709a.htm

Arts, entertainment and recreation services 2001
http://www.statcan.ca/Daily/English/030711/d030711d.htm

Radio listening Fall 2002
http://www.statcan.ca/Daily/English/030731/d030731a.htm

Private radio broadcasting 2002
http://www.statcan.ca/Daily/English/030703/d030703b.htm

Government expenditures on culture 2000/01
http://www.statcan.ca/Daily/English/030801/d030801b.htm

Annual survey of newspaper publishers 2001
http://www.statcan.ca/Daily/English/030806/d030806a.htm

Book publishers and exclusive agents 2000/01
http://www.statcan.ca/Daily/English/030626/d030626b.htm



BUSINESS SERVICES

Canada's international trade in services 2002
http://www.statcan.ca/Daily/English/030708/d030708b.htm

Industrial research and development 1999 to 2003
http://www.statcan.ca/Daily/English/030724/d030724d.htm



COMPUTER (IT)

A profile of workers in information technology 2001
http://www.statcan.ca/Daily/English/030724/d030724b.htm

A decade of growth: The emerging geography of the new economy
1990 to 2000
http://www.statcan.ca/Daily/English/030731/d030731b.htm



CONSTRUCTION & REAL ESTATE

Real estate agents, brokers, appraisers and other real estate activities
industries 2001
http://www.statcan.ca/Daily/English/030626/d030626f.htm



ECONOMIC INDICATORS

Multifactor productivity 2002
http://www.statcan.ca/Daily/English/030710/d030710a.htm

Private and public investment
2003 (revised intentions)
http://www.statcan.ca/Daily/English/030723/d030723b.htm



EDUCATION

University degrees, diplomas and certificates awarded 2000
http://www.statcan.ca/Daily/English/030708/d030708a.htm

Paths to post-secondary education among 20-year-olds
http://www.statcan.ca/Daily/English/030704/d030704a.htm

University tuition fees 2003/04
http://www.statcan.ca/Daily/English/030812/d030812a.htm



GOVERNMENT

Public sector statistics 2002/03
http://www.statcan.ca/Daily/English/030709/d030709c.htm



HEALTH

Smoking patterns in the 20th century
http://www.statcan.ca/Daily/English/030710/d030710d.htm

Canadian Tobacco Use Monitoring Survey 2002
http://www.statcan.ca/Daily/English/030730/d030730b.htm

Participation and Activity Limitation Survey: Children with disabilities
2001
http://www.statcan.ca/Daily/English/030729/d030729b.htm

Cancer survival statistics
http://www.statcan.ca/Daily/English/030731/d030731g.htm

Births 2001
http://www.statcan.ca/Daily/English/030811/d030811a.htm

Stillbirths 2001
http://www.statcan.ca/Daily/English/030811/d030811b.htm

Repetitive strain injury 2000/01
http://www.statcan.ca/Daily/English/030812/d030812b.htm



HOSPITALITY

Food services and drinking places 2001
http://www.statcan.ca/Daily/English/030627/d030627g.htm



INTERNET

Internet service providers: Struggling to remain competitive 2001
http://www.statcan.ca/Daily/English/030715/d030715a.htm



JUSTICE & SECURITY

Crime statistics 2002
http://www.statcan.ca/Daily/English/030724/d030724a.htm

Sexual offences 2002
http://www.statcan.ca/Daily/English/030725/d030725a.htm



MANUFACTURING

Energy consumption by manufacturing industries 2002 (preliminary)
http://www.statcan.ca/Daily/English/030718/d030718e.htm



MARKET

Family income 2001
http://www.statcan.ca/Daily/English/030625/d030625b.htm

Survey of Financial Security: Property taxes 1998
http://www.statcan.ca/Daily/English/030724/d030724c.htm

2001 Census Aboriginal population profile
http://www.statcan.ca/Daily/English/030729/b030729a.htm



OTHER SERVICES

Personal services industry 2001
http://www.statcan.ca/Daily/English/030630/d030630d.htm



SMALL BUSINESS

Small and medium-sized enterprises financing in Canada 2001
http://www.statcan.ca/Daily/English/030630/d030630b.htm

Financial strategies in small firms
http://www.statcan.ca/Daily/English/030806/d030806b.htm



TRADE

Control and sale of alcoholic beverages 2001/02
http://www.statcan.ca/Daily/English/030709/d030709b.htm

Non-store retailers 2001
http://www.statcan.ca/Daily/English/030725/d030725b.htm

Annual wholesale trade 2001
http://www.statcan.ca/Daily/English/030624/d030624b.htm



TRANSPORTATION & TOURISM

Air charter statistics 2002 (preliminary)
http://www.statcan.ca/Daily/English/030709/d030709d.htm

Couriers and local messengers industry
2000 (revised) and 2001 (preliminary)
http://www.statcan.ca/Daily/English/030718/d030718c.htm

Canadian Travel Survey: Domestic travel 2001
http://www.statcan.ca/Daily/English/030702/b030702a.htm

The taxi and limousine service industry
2001 (preliminary data)
http://www.statcan.ca/Daily/English/030813/d030813c.htm

Provincial and territorial tourism satellite accounts 1998
http://www.statcan.ca/Daily/English/030625/d030625d.htm



WORKPLACE

Part-time work and family-friendly practices
http://www.statcan.ca/Daily/English/030626/d030626g.htm

Sources of workplace stress 2000
http://www.statcan.ca/Daily/English/030625/d030625c.htm

 

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HOW ACCURATE IS YOUR BUSINESS PLAN?

One of the most difficult aspects of writing a business plan, especially if
it is for a new venture is the financial section.  How do you know what to
expect?  How can you be sure you are not under-estimating performance or
more importantly being dangerously over-optimistic?

Financial benchmarks are the best answer to this problem.  They let you know
what the normal operating conditions are within your industry. They are a
reality check for your own financial projections.

Many new entrepreneurs ignore financial benchmarks citing them as being too
old or too broad. They do this at their own peril. If you dismiss financial
benchmarks out of hand you are left with conjuring numbers "out of thin
air".  You will end up with "hopeful" financials as opposed to achievable
performance estimates

Currently most financial benchmarks are based on the North American Industry
Classification (NAICS) system.   While this classification system is
comprehensive, it is by no means exhaustive.  Sheer logistics dictate that
there be a limit on business detail.   This means that you will not find
benchmarks for a dog walking business but you will for the category: "Pet
Care (excluding Veterinary) Services".

For more information on classification systems see the Statistics Canada web
site: http://www.statcan.ca/english/concepts/industry.htm.  If you are
unsure of which industry code is most appropriate for your business, use the
Statistics Canada web site to view official industry definitions and example
businesses.  If you are really stuck send us an e-mail at
contact@gdsourcing.com and we will offer our recommendations.

There is no doubt that your business will perform differently than the
benchmark ratios.   Every business does.  This does not mean however that
your operations are absolutely unique from your sector.  Do not think of
your business as a Zebra - a unique and exotic equine, incomparable to all
others.  Rather aim to be a thoroughbred - a common horse with exceptional
ability.  Only by recognizing how a horse wins a race can you achieve a
similar result.  Financial benchmarks reveal how the best in your industry
perform.

There are a number of sources for Financial Benchmarks.

Canadian Industry Profiles (Annual)
(This is our own product based on the most current Statistics Canada small
business financial ratios. (Data covers 1999-2000 for ratios and 1999 to
2002 for establishment counts) For more information and a sample see:
http://www.gdsourcing.ca/SBDC.htm#CIP)

Performance Plus (data covers 1997, 1995, 1993)
(This is the data available at the Industry Canada web site)
http://www.sme.ic.gc.ca/

Dun & Bradstreet Canadian industry norms & key business ratios (Annual)
Available in some major reference libraries

Financial benchmarks generally look at three areas of a business'
performance:  Liquidity (measures a company's ability to cover its
expenses), Efficiency (measures how quickly your products/services sell),
and Profitability (measures the "bottom line").

This last measure is the most popular one.  People like to find out what
percentage of businesses are actually making a profit in their sector.   It
is important to know how your industry is performing overall but keep in
mind this figure in no way predicts your own business' success.   60% of Pet
Care Service businesses have a net profit but just because the majority are
profitable does not mean your particular business will be.

What is more instructive is to use financial benchmarks to determine average
profit margins, typical debt loads and collections efficiency.  By looking
at these more in-depth ratios you can determine whether your own financial
estimates are in-line with industry performance. A bank will not loan you
money because you can show them profitable financial benchmarks.  They may
however, if you can show your cash flow estimates are realistic and based on
industry norms

Do not be frightened by financial ratios.  Despite many of their
intimidating accounting names they are mostly straightforward comparisons of
specific financial figures.  Clear your mind of any past accounting traumas.
Take a deep breath and with your calculator in hand take it one ratio at a
time.

Nearly all sources of financial benchmarks have a glossary with plain
language explanations. For example our Canadian Industry Profiles include 5
pages of simple definitions.  Use these resources to your advantage.

Some other sources of ratio explanations include:

Financial Tools to Help Analyze Your Business
Alberta Agriculture, Food & Rural Development
http://www.agric.gov.ab.ca/food/process/new_business/fin_analyze.html

How to Analyze Your Business Using Financial Ratios
Edward Lowe Foundation
http://www.esmalloffice.com/rlibrary/PL12_1500.htm

Business Owners Toolkit: Business ratios
http://www.toolkit.cch.com/text/p06_7100.asp

Financial analysis ratios, BIZStrat Strategic Management
http://www.isy.vcu.edu/~paiken/classes/bizstrat/ratios.htm

Remember to keep in mind your purpose behind examining financial ratios. You
are not trying to be a professional financial analyst.  You are simply
trying to ensure your financial performance expectations are reasonable and
within industry norms.

For example you could use financial benchmarks to determine that your
expected 10% net profit margin for your Print & Picture Frame store is well
beyond the 0.6% industry median and double the 5.1% margin recorded by the
top 25% of businesses in your sector.  (The median is the value where half
of the businesses perform better and half perform worse.)

This major discrepancy alerts you to the fact that your financial
expectations are overly optimistic for your type of business.  You need to
see if you have forgotten to include certain expense items or if your sales
expectations are unwarranted.

Once you have been in business a year or more you can use financial
benchmarks to determine where your business is not meeting its potential.
Is your liquidity tighter than it needs to be?  Are you lagging in
efficiency?  Could your bottom line be better?  By knowing industry norms
and benchmarking specific indicators, you can understand how better to
improve performance.

While it is true that when a business' performance exceeds financial
expectations it can create a management challenge, under-performance is by
far the more common and more lethal scenario.  Do not let your enthusiasm
for success distort your financial projections.  Use financial benchmarks as
a reality check to ground your expectations and anticipate realistic
success.


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WILL MY BUSINESS SURVIVE?


It is natural before you start a business to want to find out the "odds of
success".  We are frequently asked for business failure and survival rates.

For failure and survival rates to be accurate the same businesses must be
tracked annually over a number of years.  Statistics Canada has conducted a
number of studies in this area.  These include:

Failure Rates for New Canadian Firms: New Perspectives on Entry and Exit.
(Feb 2000)($35)(Save 20% at GDSourcing:
http://www.gdsourcing.ca/works/Statcan.htm#FailureRates)
(This study investigates the determinants of failure for new Canadian firms.
It explores the role that certain factors play in conditioning the
likelihood of survival - factors related to industry structure, firm
demographics and macroeconomic cycles.  This publication actually provides
failure rates by broad sector and region)

Failing Concerns: Business Bankruptcy in Canada (Nov 1997) (Free)
http://www.statcan.ca/english/freepub/61-525-XIE/61-525-XIE.pdf
(This study suggests that the underlying factor contributing to financial
difficulties is management failure rather than external factors associated
with imperfect capital markets.)

A Portrait of Entrants and Exits (June 1999)  (Free)
http://www.statcan.ca/english/research/11F0019MIE/11F0019MIE1999121.pdf
(A detailed portrait of the characteristics of new firms that survive and
those that fail.)

Learning from failure: Organizational mortality and the resource-based view
(August 2003) (Free)
http://www.statcan.ca/english/research/11F0019MIE/11F0019MIE2003202.pdf
This paper examines the factors underlying firm failure, and compares the
failure mechanisms for young firms against those of older organizations.

In a nutshell the studies conclude that new businesses generally fail due to
shortcomings in managerial knowledge and financial management abilities
while older businesses fail because of an inability to adapt to
environmental change.

While all of these studies are informative, they are not very specific with
regards to industry sectors.

Statistics Canada has only one survey that tracks business survival with any
sort of industry detail (3-digit NAICS. See Statistics Canada for industry
headings:
http://www.statcan.ca/english/Subjects/Standard/naics/2002/naics02-menu.htm)
.  It is called Employment Dynamics.  The tables from this survey are
primarily used to analyze how businesses in different size categories
contribute to employment change.  You can also use this data for annual
estimates of employer business entry and exit.

This data however is quite expensive and dated:  $70 for one industry and
1999 is the most current figures available.

The next best option for estimating how businesses are faring within a
specific industry sector is to examine business counts.  The primary source
for this information is the Statistics Canada Business Register.  By
comparing the total number of businesses from one year to the next you can
get a perspective on how quickly a sector is expanding or contracting.

You must however be careful when looking at this data.   It does not count
how many businesses failed or started but rather the net change in the total
number of businesses. (NET CHANGE = total existing businesses - businesses
that have disappeared + new businesses).  There is no way to know how many
new entrants and failures are part of the net change.  For example in an
extreme situation you could have an industry with 100 businesses one year
and 102 the next.  The net growth of 2 businesses could be the result of 80
businesses disappearing and 82 new businesses starting up.

Regardless of this extreme possibility the data is still a good indicator of
sectors facing severe hardships (e.g. a sharp net loss indicates new
businesses are not replacing those that are disappearing.).  It also
identifies sectors where competition is expanding quickly (e.g. a rapid
increase in the net number of businesses competing with one another.).

Business count comparisons are included in our Canadian Industry Profiles:
http://www.gdsourcing.ca/SBDC.htm#CIP  You can also purchase this data from
Statistics Canada.

The ultimate statistic of business failure is bankruptcy.  Here again you
must be careful with how you interpret the numbers.  Only a small portion of
firms that fail actually file for bankruptcy so a low number of bankruptcies
does not necessarily mean a high survival rate.   Nevertheless, when
bankruptcy is compared to the overall number of businesses in an industry it
can alert you to sectors facing particular hardship

The Office of the Superintendent of Bankruptcy web site provides monthly and
annual bankruptcy statistics by major industry sector (e.g. retail,
manufacturing) and by urban centre (no industry detail).
(http://strategis.ic.gc.ca/epic/internet/inbsf-osb.nsf/vwGeneratedInterE/h_b
r01011e.html)

Although this online data is comprehensive and current, it is limited in
industry detail.  To access more detailed information (4-digit SIC) you have
to contact the Office of the Superintendent of Bankruptcy directly.  We
recently had the pleasure of doing so and we were promptly provided with
2002 and Jan-Jul 2003 data.

Highlights from 2002 figures indicate that the sectors with the highest
number of bankruptcies were:

1. 9999 - Other Services not elsewhere classified - 822
2. 4561 - General Freight Trucking Industry - 730
3. 9211 - Restaurants, Licensed - 541
4. 7721 - Computer Services - 227
5. 4013 - Residential Renovation - 195

For your assistance we have placed this data on our site free of charge.
You can now find out the number of bankruptcies and the total number of
businesses in your industry for 2002.  (See:
http://www.gdsourcing.ca/Bankruptcy.htm)  The data is organized by Canadian
SIC code.  For details and definitions of this classification system see:
http://www.statcan.ca/english/Subjects/Standard/sic/sice80-menu.htm)

Finding out the failure/survival rates, bankruptcies and business counts of
your industry is interesting but they only alert you to challenges in your
sector.   They do not identify what these challenges are.  Never use this
type of data as the sole basis of deciding whether or not to start a
business.  It is only a starting point to find out more information.


 

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SMALL BUSINESS STATS FACTS

Each Business Researcher Newsletter ends with a collection of five
statistics that every entrepreneur should be aware of.

1. What % of Canadian small businesses have a colour printer, copier or
multifunction device?

78%

Source: Xerox/Environics (June 24, 2003)



2 What percentage of new jobs created in the first half of this year were
due to self-employment?

57%

Source: CIBC (Aug 2003)



3. What % percent of Canadian family business entrepreneurs have a
succession strategy in place?

44%

Source BDO Dunwoody/COMPAS (June 2003)



4. What is the main downside of running a family firm?

Lack of downtime (cited by 68%)

Source: BDO Dunwoody/COMPAS (June 2003)



5.  What % of entrepreneurs warn against hiring in-laws?

48%

Source: BDO Dunwoody/COMPAS (June 2003)



 

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URL: http://www.gdsourcing.ca/newsletter/newsletter6-7.htm
UPDATED: 11/24/03
1998-2003  GDSourcing - Research & Retrieval