BDC study | Bet digital, gain financial health

A priori, hairstylist Luc Vincent doesn’t have the typical tech entrepreneur profile at all. In 2018, he decided to “create a website,” as he puts it, to sell homemade hair styling products.

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Karim Ben Issa

Karim Ben Issa

“We were walking around a little perplexed, but we had time to settle down,” explains the professional, who is based in Vaudreuil-Dorion. When the epidemic arrived, it was a boom. We’ve gone from our turnover of a few hundred thousand to several million dollars. »

Luc Vincent’s example perfectly illustrates the results of an unpublished study by the Business Development Bank of Canada (BDC), which will be revealed on Tuesday morning. Based on two surveys of 2,069 managers of Canadian small and medium-sized companies, supplemented by two econometric analyzes, this study establishes a close association between financial health and “technological maturity”.

Photo by Robert Skinner, Press Archives

Pierre Clairux, Vice President and Chief Economist at BDC

“Small and medium-sized businesses that invest in digital technologies do better than others,” says Pierre Clero, Vice President and Chief Economist at BDC. It’s been said for a long time, but the study shows it. Those who invest more enjoy stronger growth, are more resilient and issue more. They also have less difficulty in obtaining financing. Well, that surprised us. »

one of 20 feet

In 2021, SMEs invested an average of $118,430 in digital technologies, but the picture varies greatly depending on the size of the business. Those with between 1 and 4 employees invested $48,243, while the largest, between 100 and 499 employees, are also the most ambitious in this regard, averaging $422,427.

First note, barely 5% of SMEs can be considered digitally “advanced”. Thus we qualify companies that have implemented a range of actions, from online sales to data analysis, including the digitization of business processes, the development of a digital plan and the design of a “website”. The BDC study classified companies according to six “pillars” allowing classification into four distinct profiles.

By comparing these features with more traditional economic data, we find that technological maturity is an excellent indicator of financial health. Two tables, in particular, are eloquent.

The proportions are similar when we talk about exporting: if 11% of the latecomers set out to arrive, the proportion rises to 60% among the more advanced.

“We’ve been very successful internationally,” says hairstylist Luc Vincent, whose company has about fifteen employees. “Before the pandemic, we mourned my wife in the basement. In 18 months, we are in a 5,000 square foot warehouse.”

“We see that there is a gap between companies that are investing and those that don’t,” says Cléroux. Among the so-called “lagging”, 33% had losses or zero growth. it’s huge. It’s hard to make a profit when you’re not digitizing at all. »

There is also a direct link between technological maturity and companies’ response to taking measures to differentiate themselves from the competition.

minority women

The least digitized sectors are personal services, construction, natural resources, wholesale trade, and transportation. At the other end of the spectrum, we find the best degrees in retail and ICT (technology, information and culture).

We also dissect the composition of the most advanced companies to see the profile of their owners. Women and people with disabilities are the least represented, while young people under 35 and Indigenous peoples are among the most tech-savvy.

“We don’t have explanations, it’s a simple observation,” the BDC vice president outlines.

Entrepreneurs were also asked about the main barriers to digitizing their businesses. For 42% of them, it is a problem of high costs; 32% are concerned about cyber security; 27% indicated uncertainty regarding the profitability of this transformation.

Rather, never before seen in such a study, an entire page is devoted to illustrating the low cost in 2022 of the solutions offered, point by point. An entry-level website costs between $0 and $29 per month, a mid-range accounting system can be purchased between $11 and $48, and a high-end CRM will cost between $60 and $100 per month.

Mr. Clearo asserts that the high costs case “is no longer true. We wanted to deconstruct this myth, it persists.

It should be remembered that BDC is one of the main partners of the very recent Canadian Digital Adoption Program (PCAN), which is targeting around 160,000 small and medium businesses within four years.

“It’s very easy, when you have the right tools,” says Luc Vincent. Facebook, Shopify, they have it all, it’s plug and play. »

BDC’s chief economist also disagrees with the prevailing claim that digital transformation is not necessarily attractive to all types of businesses. “E-commerce has tripled during the pandemic, more and more consumers are buying online, and when they are not, they turn to the Internet for information. If you are not there, you are invisible.”

The study also included hairstylist from Winnipeg, Bryce Okumabua, who, like Luke Vincent, started selling online before the pandemic and saw her sales soar when her store closed. “She is very creative. By making videos about new hair styling methods, she has attracted clients, assures Mr. Cléroux. The new generation wants to make appointments online, they no longer call.”

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