Critical role of small business in local economies

Critical role of small business  in local economies

If Northern communities are ever to have viable local economies, the only way is to take advantage of the entrepreneurial spirit and dedication of those who start and run small businesses, but that fact is not appreciated or even understood.

Government departments with high-paid staff and big budgets are not the ones who create jobs. They assist and build on the efforts of the individuals who do. Oddly, those in the private sector, the ones with the greater value, are too often not rewarded with good incomes and job security.

Few people have the entrepreneur ‘gene,’ that special combination of organizational skills, including the desire to serve the public, and the drive that gets them to start a business and take risks.

While unions pressure governments and corporations for better wages, benefits and perks, small businesses lag further and further behind, creating a skewed system where employees of small businesses are poor second cousins.

Running a business in a community with a small population is particularly tough. There is barely enough volume to make money, which is why so many businesses offer an array of services or products, attempting to expand their areas of opportunity in order to succeed. Whether or not any business does well depends on a number of factors: the ability and instincts of the business person; the desirability or need of their offering to the public; and how well the community is doing economically. That third point, having an environment that breeds success, is critical and that is the area that needs work.

Much of the economy in Canada’s North is dependent on government, so large and pervasive that it creates its own industry. More and more government services are being centralized into the capital cities. Without government demand to sustain them, there is little need for services or retail support at the community level. Whitehorse already dominates the Yukon, while Nunavut has stronger regional centres. The centralized NWT government model continues to evolve, sustaining the economy of Yellowknife, but eroding any prospects in the communities.

The promotion of large-scale resource development projects, the only other initiative bolstering community economies, is an opportunity for those with specific skills and the stomach for an away-from-home lifestyle (usually two weeks in, two weeks out) that only suits certain people. Plus, projects like that require international demand for resources and so offer an uncertain future. That takes us back to the critical need to foster economic development at the community level. The best way to do that is to encourage entrepreneurism. How best to do that?

Most communities, as well as the territorial governments, have a local preference policy intended to foster and sustain homegrown small businesses. Those types of programs are often criticized. Detractors claim they bloat the cost of goods and services. A past study examining the cost of the NWT government’s Business Incentive Program (BIP), with its two-tiered preference incentives (local and territorial) for all government purchases, found the cost of the program was miniscule. In fact we suggest that such programs do not go far enough.

Security for small business employees is tenuous, as it depends on the ability of the key entrepreneur to make good choices for the company to do well. Private sector pay is well below that of government and corporate employees and benefits are minimal. While unions pressure governments and corporations for better wages, benefits and perks, small businesses lag further and further behind, creating a skewed system where employees of small businesses are poor second cousins. That is not how it should be.

In a rapidly changing world, although new opportunities are springing up through the internet, the challenges for community-based businesses continually grow greater. The pot of gold at the end of that elusive rainbow is a moving target for the entrepreneur and can quickly vapourize leaving little return for a lifetime of work. That is hardly incentive to get into business.

Small businesses, the services and products they provide and the jobs generated will remain essential, critical even, to communities into the future. That is all the more reason to put high value on those few individuals whose initiatives will result in viable community businesses. What is needed, the challenge, is to provide an environment in communities that encourages and supports small business so that they can be profitable and offer decent wages and benefits to their employees.

Northern Journal

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