BMO Study: Nearly Four out of Ten Small Businesses Looking to Expand Within Canada

A majority of entrepreneurs also set to expand abroad within five years

TORONTO - Among the more than one million small businesses spread across Canada, a new poll shows that 39 per cent of entrepreneurs are interested in connecting with or doing business in another province. This compares with 30 per cent of Canadian business owners that are looking to expand outside of Canada, including China, India, the United States and Europe.

The findings come from a survey, conducted by Leger Marketing that asked business owners if they were planning to do business outside their current markets over the next five years. This ranged from opening a new location, serving new customers in another region, or building business relationships within another market.

The study revealed that for those business owners who are considering expanding to other provinces, the most desirable regions are Ontario (11 per cent), Alberta (8 per cent), and Quebec (7 per cent). Of businesses that want to expand into Alberta, the most likely are those located in British Columbia and Ontario.

“There are growing opportunities to export to emerging nations and the unprecedented ability to invest through imports,” said Doug Porter, Deputy Chief Economist, BMO Capital Markets. “However, businesses should also consider the many growth opportunities within Canada, which continues to offer a very stable business environment. We expect Alberta, Saskatchewan and British Columbia to continue to lead the way for overall growth.”

Looking at the three provinces most cited by survey respondents, Porter noted some of the positive factors that are making these attractive for business expansion, including:

In Ontario, the labour market has recovered and the housing sector is strong.
In Alberta, the energy sector has picked up, and real GDP is expected to expand 3.8 per cent this year, placing it near the top of the growth leader board.
Strong demand for metals and other non-metal minerals is boosting activity in Quebec, while the provincial government’s efforts to help companies grow in the province has attracted more exploration and expansion plans.

In addition, Porter expects that British Columbia will experience 3 per cent growth into 2012, with continued investment in the energy sector. For Saskatchewan, activity should continue at a brisk pace this year; with robust exploration in the oil and gas sector, and solid prospects for uranium.

“Expanding into new markets is a good strategy for businesses looking to mitigate risk,” said Gail Cocker, Senior Vice-President, Commercial Banking, BMO Bank of Montreal. "In the same way that diversifying an investment portfolio can guard against market volatility, a company that diversifies its sales, geographically, can achieve the same benefit. While emerging markets offer many positives, there also exists significant upside potential for growth in markets across the country.”

Of the 30 per cent of businesses looking to expand outside of Canada:

Seventy-six per cent have plans to do business in emerging markets and 57 per cent with the United States
China now rivals the United States as the most appealing foreign market (57 per cent)
India at 47 per cent, and Europe at 38 per cent, round out the top choices for Canadian businesses looking to expand externally

The online survey was conducted by Leger Marketing between February 1 – 25, 2011, using a sample of 507 Canadian small business owners. A probability sample of the same size would yield a margin of error of ±4.4 per cent, 19 times out of 20.