From tariffs to taxes to foreign worker shortages: These are the issues small businesses are grappling with today

The participants

Jack Shinder, chief executive of Ambico Ltd., Ottawa:

Ambico is a family-owned firm that manufactures custom doors, frames and windows for commercial clients in Canada and the United States. It has been in business for 70 years and employs approximately 115 people.

Adele Larkin, general manager of Black Rock Oceanfront Resort, Ucluelet, B.C.:

Black Rock is a 133-suite hotel property on the west coast of Vancouver Island. It has been in business for 16 years and employs 135 people.

Kevin McLaughlin, chief executive of Zygg Mobility Inc., Toronto and Vancouver:

Zygg supplies and services e-bikes for consumers and commercial clients in the hospitality and food delivery business, as well as municipal governments and educational institutions. Previously, McLaughlin founded AutoShare, which he sold to Enterprise Rent-a-Car in 2014.

Dan Kelly, chief executive of the Canadian Federation of Independent Businesses (CFIB):
Canada’s largest non-profit organization devoted exclusively to the interests of independent business owners. 

The discussion

Financial Post (FP):

Thanks, everyone, for joining us today. Let’s start by talking about the biggest challenges your company is facing right now. Obviously,

tariffs

are front and centre for a lot of Canadian businesses, but what are some of the other issues you’re dealing with?

Jack Shinder:

We’re very active in the United States and across the country. Seventy per cent of our business goes to the U.S., so cross-border issues have a major impact. What the current environment has done for us as a manufacturer is that it’s really allowed us to focus on some best practices we need to embrace in terms of customer service, product quality, development of product lines and that sort of thing.

We had already been working on these over the past 12 months, but now the urgency is there, and it has allowed us to focus in and say to our customers — both in Canada and the U.S. — that we are present for them, that we are market leaders in our sector, and that we are going to grow our business throughout this period, with a great deal of input and creativity. So, that’s how we’re looking at the current environment. And we’re excited about what we’re doing.

As for the tariffs, our Canadian customers, as you might imagine, are doubling down on the business products that we manufacture here in Canada. A lot of these customers have been with us for 20 to 30 years. And it’s the same on the American side. We’ve been in that market for 30 years.

Two months ago, we were already a month into this tariff business, but our American customers were pretty much unaware. We started reaching out to our customer base and saying, “Hey, this is what’s happening and here’s how we’re addressing it. We want to continue working with you and would like to know what your position is.” And they’re all saying. “Yep, we want to work with you, too, and our order book remains strong.”

FP:

How about you, Adele?

Adele Larkin:

The biggest issue for us as a small-business operator is the

cost of living

. It’s very difficult to attract talent to the coast. The living wage here is $27.42 an hour. If you look at Toronto, it’s $25 an hour. So, to put that in perspective, the largest component of the living wage is your housing cost. We have a very small population of just under 2,000 people. Trying to hire people locally who already have housing is a challenge. We need to try to attract other people into the community and it’s really expensive to be here. It’s beautiful and we love it, but it’s expensive.

FP:

Kevin, what about Zygg?

Kevin McLaughlin:

Historically, two-thirds to three-quarters of our customers have been individuals; very often foreign students renting an e-bike to work for, say, Uber Eats. A nice $3,000 to $4,000 e-bike will rent for the season for $700 to $900 full service.

Unfortunately, we got hit with the changes to the education visas. A lot of people who come in on those visas can only work 20 hours a week, and food delivery is basically the best way to earn money, especially if you don’t speak English very well. And, of course, this is a capital-intensive business, so we’re affected by changes in currency and the tariffs.

My revenue is 100 per cent derived in Canada, but our supply of bikes comes from either Asia or Europe, sometimes in partnership with companies in the U.S., so that’s a new wrinkle in terms of what kind of tariffs might apply. I have business loans from the U.S., denominated in U.S. dollars, so that’s another factor.

FP:

Dan, what have you been hearing from CFIB’s members?

Dan Kelly:

We have 100,000 small and medium-sized (SMB) independently owned and operated businesses as members right now across the country. And we collect a ton of data from them on their top issues of concern, and the ones we’re talking about here are at the top of that list at the moment.

First, the tariff issue is of huge concern to business owners, and, mistakenly, a lot of Canadians believe

Canada-U.S. trade

is only a big-business issue — they think of car manufacturers and other big producers — but SMBs are heavy in Canada-U.S. trade.

Our stats show that about 16 per cent of our members export directly to the United States and nearly half import. It is Canada’s counter-tariffs that are going to have a bigger and more immediate impact on SMBs than the export tariffs, which are devastating in their own right and have spillover effects, too.

This, of course, was precipitated by a dramatic decrease in the value of the Canadian dollar and that is creating its own hellish problems for a lot of business owners.

What are they doing about it? Our data shows that about half of business owners are using the hope-and-pray strategy; they hope there will be some rethinking of all this. The other half of SMB owners we’ve talked to have been taking action. They are doing some of the things you talked about, Jack, staying in constant contact with U.S. partners, whether they’re suppliers or purchasers. That is such a smart strategy because talking to your customers in advance can go a long way towards keeping them.

FP:

Are SMBs disproportionately affected by the counter-tariffs?

Dan Kelly:

I wouldn’t say disproportionately. And small firms have some advantages. They can make decisions and turn things around more quickly than their larger counterparts. They typically have greater hands-on relationships between their owners and their customers or suppliers, which they can lean into. That personal connection can count deeply in moments like this.

Where small firms struggle, of course, is having funding and the financing to ride out challenging economic times. They just don’t have the bandwidth. And a lot of SMBs are still weakened from the pandemic. The average small business took on around $100,000 in additional debt just to get through that, so a strong wind could blow down some of these small firms.

FP:

What are some ways that smaller businesses can prepare for or circumvent the effects of the current uncertainty?

Jack Shinder:

I would say investment is particularly important. And maybe this is too easy to point towards, but the Canadian government’s change to the

capital gains tax

was extremely poorly conceived, and I just thought, “Oh my god, they’re just saying to international business, ’Go somewhere else. Canada is not welcoming.’”

We need to be looking not only at rolling that back, but also diminishing the amount of capital gains to attract people. If I’m a foreign business or even a Canadian business looking to set up somewhere outside of Canada, I want to go to an environment where

interest rates

are low and where capital is available, and right now Canada is not that place.

I’m looking at this not just in terms of my personal experience, but from a broader business perspective. How are we going to attract people and capital in an exciting business environment? And the government has a real role to play here in terms of setting the table so that we can all take advantage of that.

Adele Larkin:

One of the things that’s greatly affected us is the student visa and employment fees program. We rely heavily on our

foreign worker program

here on the coast, and the changes — reducing work visas to one year versus two and not lowering the cost of the program — have made it a non-starter for us now.

The housing we have available at the resort is well-suited for a new arrival to Canada who’s just getting started and is more open to shared accommodation, but it’s hard to attract other Canadians who aren’t at the stage of wanting to live with a roommate and may be looking to replace what they had in, say, Toronto or Calgary. Housing is just too expensive.

The nice thing for us with the Labour Market Impact Assessment (LMIA) program and bringing in our foreign workers is, one, we give individuals an opportunity to extend their time here and actually get their permanent residency. And, two, for us as a business, it really helps prop up our labour force, which we struggle with every year. Our culinary team, for example, relies greatly on our foreign worker program.

Another challenge is the cost of importing to our little community here — the cost of fuel, of shipping and the potential increase in carbon taxing on the fuel — is unbelievable. That means every product I bring in here is going to be more expensive.

FP:

Considering all these challenges, what are the top government policy changes that would really help you quickly?

Adele Larkin:

It would be to change the foreign worker policy back to what it was.

Dan Kelly:

Throw that into reverse, absolutely. You’re 100 per cent right. We’re hearing that from everybody.

Adele Larkin:

It’s good to know we’re not an island.

FP:

Would that factor in for you, too, Kevin?

Kevin McLaughlin:

Yeah. I realized how much the growth of my business was dependent on foreign worker programs as we grew through

COVID-19.

I just didn’t clue in before. Hopefully we can reorganize based on something different.

One way to look at it is that there’s a very exciting opportunity here to kind of reinvent Canada as a place for investment, which we need more of, and change how we bring in more workers. We clearly need people to build factories and housing and all that stuff. And how we do that while also protecting the Canadian way of life, or whatever you want to call it, which has traditionally been more about equality and access to certain services and all the things we just do differently here, is a big question.

Another issue is corporate concentration in that Canada has about three grocery stores, three cellphone providers, etc. How do we free up competition without being anti-Canadian?

For instance, there are people in Europe who have built anti-theft devices that are basically cell-enabled tracking devices of some kind. I have sought these out, but I can’t bring them here because Canadian cell companies won’t honour the roaming SIM cards, or they will require a whole other certification process that people don’t want to go through to make it work. But they could. It will work in the U.S. and in Europe, but not here.

There are a few things like that that I would tie to the small, anticompetitive cellphone situation. How do you fix that? I’m not sure.

FP:

If you could point to one policy change that would most benefit your business, what would it be?

Kevin McLaughlin:

A lot of the stuff that affects my business is provincial. The feds kick e-bike regulation down to the provinces and bike regulations are a mess across the country.

Dan Kelly:

You’re playing my song.

Kevin McLaughlin:

We have all these rules — the bike has to have a certain top speed, motor size, etc. — and they’re all over the map. You can go into any store and buy illegal “legal” bikes and all that. And it goes back to that certainty that business likes. What are the rules? And because these bikes are primarily made elsewhere — there are almost no e-bike manufacturers in Canada, or very few — the costs and the expertise and all that come from abroad. Should the feds be a part of it? People might say, “I’m a Canadian company” or that their bikes are assembled in Canada, but that just means, say, the wheels weren’t on when they came in. There’s a bit of cloudiness involved in all that stuff.

I was out trying to raise money for this business in 2019-’20, and I’d done it before, but the startup world really sucks in Canada for a bunch of reasons. Businesses need capital and I don’t know what we can do to encourage that, but it’s going to be really key for us because many of us are changing the way we do things, trying to start new things and all of that. That’s going to be really important to keep an eye on.

FP:

Dan, do you have any insight into that, whether there are any potential changes forthcoming, from governments or elsewhere, that would address some of the things Kevin is talking about?

Dan Kelly:

Look, there are some reasons for optimism. I was really struck, Kevin, by what you were saying about the regulation of e-bikes because that fits in with the theme of

interprovincial trade barriers

. In my 30 years with the CFIB, I’ve sadly been like Charlie Brown more times than I care to remember, with this being discussed and huge, lavish promises being made, and then the football is snatched away at the last minute.

But there does seem to be some momentum on this file. For example, governments in Ontario and Nova Scotia have both said — and I think there are other provinces looking to emulate this — that they’re going to mutually recognize the other province’s regulations. If your product is okay in Ontario, it’ll be okay in Nova Scotia. You’re not going to have to undergo and meet 1,000 other tests or standards to do business there. I see it as a solution that, in five minutes, gets rid of thousands of tiny little differences between governments.

My favourite example of an interprovincial trade barrier is safety kits. Every province has different items that need to be in your company’s first-aid kit — different numbers of bandages and amounts of iodine or whatever. As a manufacturer, you couldn’t produce one for the entire Canadian market. You had to produce 10. The government put together a blue-ribbon panel of bureaucrats from across the country, who spent six months and announced in a big flourish that, “Hey, we now have a standardized health and safety kit for the Canadian market.”

Well, I can tell you that’s one rule and the average province has 400,000 regulations, so if we’re trying to do that one at a time, our grandchildren’s grandchildren will be talking about this. But now provinces are just going to say, “Hey, if it’s good enough over there, it’s good enough in my province.” And that is the solution to get rid of a whole bunch of these hassles that exist.

FP:

If we can shift to the future now, what are your goals for the rest of the year and long term? Jack?

Jack Shinder:

Our plans, which really came into focus for us early in the fourth quarter of 2024 and are unchanged by the tariff situation, are about growth, about product development, supporting our staff, attracting more talent. Those forward-looking plans have only become more urgent. We’re on a really good path there.

FP:

Does that mean you’re investing back into the company?

Jack Shinder:

Yeah, new machinery. Because we’re on track for growth in 2025.

In terms of tariff support, I understand very clearly that the federal government is in caretaker mode right now, but it is really critical that there be significant support for industry, especially export-oriented industry or else, at the very least, we are not going to grow. When we’re paying millions of dollars in tariffs that we can’t pass onto our regular customers, but we can’t sustain over the long term, government needs to be there to support us.

Kevin McLaughlin:

Exactly. The government needs to be involved. What we’re going through is too big for them not to, and hopefully they can guide us towards something healthier down the way.

I’m always looking for new ways to improve the business and to be more efficient. We’ve been doing a lot of that. And I’ve diversified a bit, in that I now work with a Kelowna-based company called Monashee Racks, selling commercial bike racks and security systems. I was led to this company through trying to make people feel comfortable about owning a $3,000-$4,000 bicycle. And I’m also working with a New York-based company that is bringing up battery-swapping stations, where you can pull out an e-bike battery, because they’re concerned about battery safety, too.

We’re trying out some things, but also being wary of anything that requires a big investment.

FP:

How about you, Adele? What are some of Black Rock’s immediate and longer-term plans?

Adele Larkin:

First, we’re amping up our marketing in the states. That’s our short-term thing: to try to continue to grow that market because we want people to be aware that we appreciate and gleefully welcome our U.S. visitors.

From an investment standpoint, we thankfully made some smart decisions last year and completely shifted our entire IT strategy for managing our business here, and I’m glad we did because the tools we put in place are certainly helping us make quick decisions and respond on a daily basis, versus having to wait for the first-quarter results to come through. We now have tools in place that will allow us to make decisions on the fly. That was a massive investment for us, well over $150,000 worth of infrastructure, but worth it.

• Seven big ideas to help Canada win
• Canada is a supercomputer laggard. That needs to change

Hospitality and tourism is a $182-billion business for Canada, and I’m hoping it’s robust enough that it will continue to survive. It certainly managed its way through the COVID challenges, so, hopefully, there are smart decisions being made throughout the country that keep this and all of our business segments alive and well for the Canadian GDP.

Bookmark our website and support our journalism: Don’t miss the business news you need to know — add financialpost.com to your bookmarks and sign up for our newsletters here.