Ken Kobly of the Alberta Chamber of Commerce expounds on the big challenges facing small business
We’re headed in the right direction, but it’s still uncharted waters
by Alberta Venture Staff
Alberta Venture: Small business confidence is up in Alberta, but about one-third of small business owners still describe the health of their company as “bad.” Can you explain the contradiction?
Ken Kobly: It’s a lot of uncertainty. Business obviously enjoys stability and predictability, and right now, the reality is that the economy is not very stable. But, to tell you the truth, small business is probably the most optimistic group of businesses out there, because they take a look at what the challenges are and say, “I can do it.” But what you’re seeing is most small businesses are very concerned about what they’re going to facing in the next year to three years.
AV: We’re seeing a bit of a recovery in the oil and gas sector, albeit a muted one. Is small business part of the recovery?
KK: It depends on where you are in the province. Calgary, obviously, is having some very difficult times. Edmonton, because of the projects we’ve had on the go in the downtown core, and with things out in the Industrial Heartland, we’ve not felt it as much. Areas like Grande Prairie seem to be chugging along quite well, but certainly not like the heady days we saw four years ago. So there are pockets. When you look at what’s going on in the mountain parks, for example, in a sea of high unemployment, in the service industry you still have a very high vacancy rate in the number of jobs that are available. So it’s kind of tough to paint the province with one brush.
We take a look at what’s happening with small business and the cumulative effect of layering on additional costs and simply where the economy is at this point in time. You take a look at minimum wage, you look at the carbon tax increase, the increase in municipal taxes, or the effect of the low loonie if you’re importing – they’re all things that, by themselves, could be smaller challenges. But when you start to layer them on and compound them, that’s where small business starts to have some issues.
AV: OK, then let’s talk policy. What is small business most worried about?
KK: It’s all rolled into one. You’ve got the federal government talking about an increase of $400 per employee by 2019 on the enhanced CPP. By itself, $400 doesn’t sound like a big deal. However, you layer that on… But I’m not sure there’s one issue over another that small business is concerned about. It’s a combination of these compounding issues.
AV: But one of the things people were happy to see in the provincial budget was the reduction in the small business tax rate. Do those compounding factors overwhelm any benefit the tax cut would bring?
KK: Oh yeah. To put it in perspective, the tax is obviously based on profit. So if you’re a small business and you have $100,000 of profit, a one per cent tax reduction is only going to save you $1,000 in taxes. By contrast, a one-dollar increase in minimum wage is going to cost about $2,400 per employee. And that thousand-dollar tax reduction – again, assuming you have $100,000 in profit, and most small businesses at this time aren’t making a profit – it comes nowhere near offsetting the carbon tax and the minimum wage increase.
[For] things like the Capital Investment Tax Credit, which the government has talked about as support for small business, the reality is, you’d have to draw a minimum of $10 million before you qualify for that program. So a small business would have to buy something of a capital nature that has a minimum value of $10 million. There are not a lot of small businesses that would be able to afford that type of capital investment. And the Alberta Investor Tax Credit is only available for businesses that operate in non-traditional sectors. Say you want to set up a retail store and are looking for investors – the Alberta Investor Tax Credit is not available to you, because that’s a traditional sector.
AV: Looking to the future, how do you see the small business landscape changing?
KK: We’re seeing more small businesses branching out into things you never would have thought of before. And we’re seeing a younger generation come through, and the technology revolution that we’ve got is appealing to those younger entrepreneurs and getting them into what you wouldn’t consider traditional small business. So there’s a tremendous opportunity for the use of technology and for diversifying what small businesses actually do.
AV: So they shouldn’t all pack their bags for Saskatchewan or B.C.?
KK: [laughs] I’m a lifelong Albertan. I’ve been here now for 60 years. I’ve seen this rodeo four times. And you know what? Every time the price of oil goes down – it doesn’t matter what government is in power – we talk about diversification, and when we come back out of the trough, we lose sight of the whole great idea of it. Having said that, I still think Alberta is a great place to live. So the idea of packing your bags and moving to Saskatchewan or B.C.? Different provinces have different issues, and I still prefer to live here.