Small businesses must measure productivity for success, says BDC

Small business is the backbone of P.E.I.'s economy — in fact this Island of 150,000 people boasts the highest proportion of small business jobs in the country — but businesses here and in the rest of Canada should be doing a better job ensuring maximum productivity, the Business Development Bank of Canada says.

Businesses can now check their productivity level with a free new tool from BDC

Sara Fraser · CBC News · Posted: Oct 18, 2016 2:00 PM EDT | Last Updated: October 18, 2016

Most Canadian small businesses simply don't keep track of their productivity and are leaving money on the table, says the BDC. (Chris Wattie/Reuters)

Small business week kicked off at the University of Ottawa

As part of small business week which runs this week until Oct. 22, BDC has released new research looking at the productivity gap between Canada and the U.S.

There's only nine per cent of Canadian businesses who are looking at their productivity level.— Pierre Cleroux, BDC

"Our productivity level is lower than the U.S., about 75 per cent," said BDC chief economist Pierre Cleroux.

"Unfortunately, we're not going in the right direction because 20 years ago, we were at 90 per cent."

Canadian workers are as skilled as in the U.S. but Canadian businesses are not investing enough in processing technology, Cleroux said.

'Money on the table'

Waste is the number one factor that makes businesses less efficient, he explained, adding there are eight different sources of waste to avoid.

Some companies make too many products, others keep inventory levels too high, he pointed out.

Many companies simply don't keep track of how productive they are, and "basically leave money on the table."

"The research that we just released shows that there's only nine per cent of Canadian businesses who are looking at their productivity level," he said, with 50 per cent not measuring their company's performance at all.

"This is really too bad, because the companies who are measuring their productivity, they are performing better," Cleroux said.

Free tool

Businesses can now check their productivity level with a free new benchmarking tool developed by BDC.

Visit bdc.ca and enter seven numbers including your number of employees, total revenue, labour costs and more. The tool will show you five ratios that compare your productivity with the rest of the sector.

The first result is an efficiency score out of 100.

"If you're 90 per cent, that's fabulous and you should celebrate," Cleroux said. "If you are 35 or 40 per cent, well, you have some work to do."

Small businesses are responsible for more than half of all jobs in Canada, Cleroux said, so are vitally important to the economy.

BDC is also sponsoring several events for entrepreneurs across Canada: there are 10 across P.E.I. including mixers and workshops — find the list here.