What small businesses can do to weather these uncertain times

As finance minister and former prime minister, Paul Martin erased Canada’s deficit, introduced the largest tax cuts in Canadian history, and strengthened regulations governing Canada’s financial institutions. Canada is now viewed as an international model for sound financial regulations. Since leaving politics in 2006, Martin has worked as co-chair for various not-for-profit organizations around the world, including Capital for Aboriginal Prosperity and Entrepreneurship (CAPE), a $50-million investment fund targeting aboriginal communities. He is the former CEO of CSL Group Inc., which manages one of the world’s largest fleets of self-unloading vessels and offshore transshippers. Today his expertise is sought after by policy-makers and business leaders at home and abroad. Carol Moreira asked Martin what small businesses in Atlantic Canada can do to weather this sluggish economy

How will the recession affect small businesses in Atlantic Canada?
Canada is better positioned to withstand the slowdown than most countries, but we’re impacted by the failure of confidence in the U.S. and Europe. Most of our exports go to the U.S. Small businesses export directly to the U.S., and many others provide services to exporters, so there will be consequences. In Atlantic Canada, one of the greatest tie-ins will be what occurs in New England.

What are the threats, and how should vulnerable businesses protect themselves?
The greatest threat is posed by the American slowdown. It’s not so much the threat of recession in the U.S. as the impact of a long period of very slow growth that should concern us. That said, small businesses in Atlantic Canada should take advantage of this to ensure that their workforce is well trained.

As a country, we can’t rest on our laurels. Ten years ago, we eliminated the deficit and built large surpluses. While we have unfortunately returned to a deficit, our situation is better than other countries. It’s time to invest in infrastructure and education while other countries are imposing austerity. Then, when the economy comes back and we’re in competition with the major economies of China and the U.S., we’ll be better positioned to compete. 

With the Canadian dollar so strong, should small businesses be investing in capital equipment? 
Absolutely.

Is it a good time for businesses to borrow or to pay down debt?
It depends on the company’s balance sheet and future plans. If expansion is contemplated, it’s a good idea to borrow now when interest rates are low and money is available. I think consumer de-leveraging [paying down debt] in Europe and the U.S. will impact U.S. banks, and that will indirectly impact Canadian lenders, so if you’re contemplating expansion, look at your finances now. If you’re heavily leveraged, take advantage of low interest rates to re-finance in preparation for tough times ahead and, if you can, pay down debt.  

What should provincial governments be doing to protect small businesses?
This is the time to invest in infrastructure and education. My time as finance minister taught me that governments get rapid payback from investments in infrastructure in terms of higher revenues from taxes and higher productivity. Atlantic Canada could also take a leaf from the books of western provinces and encourage immigration. 

Atlantic Canada is a wonderful place to live and has outstanding institutions of learning. Because of this, the region has an opportunity to attract top-flight people as other countries go through periods of austerity. Immigration, education, and infrastructure are areas where the Atlantic provinces can steal a march on the U.S. and Europe. Atlantic Canada has consistently suffered such an outpouring of people that stemming that tide is very important, and many Atlantic Canadians living elsewhere would love to return.    

Should small businesses here be targeting Newfoundland and Labrador as a growing market?
There’s no doubt that natural resources such as iron ore and fossil fuels have put Newfoundland and Labrador in a stronger position, and that has to have an important impact on consumer power and wealth in the province, which should benefit all of Atlantic Canada.

How long do you think the economic crisis will last?
We’re told there’s a 40% to 50% chance of another recession, but I think the bigger problem is slow growth in the U.S. and Europe for the next four to five years, as governments try to cut debt while being hampered by the dysfunctional nature of their political systems. In my opinion Europe is the greater problem, but the U.S. has more impact on Atlantic Canada, which needs short-, medium-, and long-term plans that focus on education, immigration, and infrastructure and build on the region’s advantages. Then when someone is looking at putting a business in Atlantic Canada or New England, they’ll choose Atlantic Canada.