There’s no secret formula for operating a successful business. But the Business Development Bank of Canada (BDC) may have come up with the next best thing.
The federal Crown corporation has produced a research report that identifies five keys to business success, based on the practices of the top 20 per cent of Canadian businesses. These are: innovation, seeking outside advice, having a solid plan, hiring good employees and building relationships with suppliers.
Pierre Cléroux, BDC’s chief economist and vice-president of research, discussed these strategies with the Advocate prior to meeting with BDC clients in Red Deer on Wednesday. He said the link between a business’s performance and its ties to suppliers is perhaps the most surprising.
“The most successful firms in Canada, they rank the relationship with suppliers as a top priority for them. They meet with them regularly, they talk to them, they share their long-term plans and they work with them to grow their business.”
It’s difficult for businesses to grow if they can’t get the inputs they need, Cléroux explained. And many have trouble finding suppliers that provide the quality they want.
The relationship theme extends to some of the other keys to business success, he said, including the use of external resources, like consultants.
“Our business environment is getting more and more complex, so entrepreneurs cannot be experts in everything. The most successful ones, they reach out outside the company in a formal way.
“They are getting advice from experienced people outside their company.”
A positive relationship with employees is also a hallmark of profitable businesses, said Cléroux.
“The most successful firms, they don’t do it with salary; they do it with everything else: the culture of the business, the flexibility of the workplace.”
Innovation is also critical, according to the BDC report.
One-third of the successful firms studied reported that 20 per cent of their products and services did not exist five years ago.
Cléroux said a willingness to adopt new technologies is important as well.
Unfortunately, he added, Canadian businesses are not global leaders when it comes to innovation.
“We’re in the middle of the pack.”
He cited the example of Internet-based sales — an area in which many American and European companies are outpacing their Canadian counterparts.
“There is still only 20 per cent of Canadian businesses selling online,” pointed out Cléroux, adding that this is surprising considering how many consumers use the Internet.
The BDC report also identifies five common pitfalls that businesses encounter, based on the experiences of 118 established companies that have suffered financial adversity.
These involve relying on too few customers, underestimating the importance of effective financial management, failing to plan for contingencies, ignoring developments in the market and waiting too long to seek help.
Asked about the current state of the Canadian economy, Cléroux said we’re benefitting from a resurgent United States.
“Our exports are increasing,” he said, pointing out that Alberta is shipping more oil and manufactured goods as a result.
Anticipated growth in the U.S. and elsewhere should increase demand for commodities, and apply upward pressure on the currently low price of oil, he said.
“I don’t think we’ll see the price going up quickly, but probably we’re close to the floor.”