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SMEs are having a tough time scaling up: BDC

Only one in 1,000 companies grew past the 100-employee mark.


MONTREAL — Canadian small and mid-sized companies are experiencing difficulty scaling up, and compared to 15 years ago, dramatically fewer of them are expanding in size, says a study by the Business Development Bank of Canada (BDC).

The Crown corporation bank for entrepreneurs says only one in 1,000 companies grew past the 100-employee mark. That represents more than a 40% drop from the 0.18% of small businesses that did so in 2001.

Mid-sized firms (with 100 to 499 employees) are also struggling, making up 0.93% of the total number of Canadian companies in 2013, a drop from 1.04% in 2001.

“Canada needs to see more small businesses transitioning to medium-sized firm level and more mid-sized companies achieving large status, because these two categories punch above their weight in terms of economic impact,” said Michael Denham, president and CEO of BDC.

BDC’s study also found only 1.8% of Canadian mid-sized businesses become large companies each year, exceeding the 500-employee mark.

Mid-sized companies generate 12% of Canada’s GDP and 17% of private sector R&D spending. They lead in revenue growth at 43% in average reported revenue from 2001 to 2013 – greater than the 36% growth for large companies and 27% growth for small businesses.

Factors that contribute to mid-sized firm growth include:

• Investments in productivity. Productivity per worker is nearly 30% greater at large companies than at mid-sized ones.

• Investments in fixed assets. Tangible fixed assets are worth $51,100 per employee versus $103,200 at large companies. Investment in assets improves productivity.

• Geographic diversification. Mid-sized firms that became large companies were more likely to be operating in three or more provinces.

Click here to access the study.

 

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