Key strategies of high performing SMEs:
- Offer employees higher compensation: at high-performing businesses with $2 million to $10 million in sales, average compensation is 45% higher than the sector average.
- Expand internationally: top SME exporters earn 21% to 26% of sales from exports, versus 16% to 19% at other exporting businesses.
- Carry less debt in proportion to their assets, giving high-performing businesses more leeway to invest in growth.
May 8, 2018, Montréal—How do Canada’s top-performing entrepreneurs achieve their success? The answer may help other companies improve their results. Leading businesses focus intently on productivity and innovation, invest in equipment such as information and communication technologies, offer competitive wages, expand internationally and control debt, according to a new first of its kind study by the Business Development Bank of Canada (BDC).
“The findings are a roadmap for success based on proven lessons from top entrepreneurs,” says Pierre Cléroux, Vice President, Research and Chief Economist at BDC. “This study offers entrepreneurs an amazing list of tips and information they can use to improve their bottom line. If Canadian businesses adopt the strategies of the top performers, our economy will benefit and the living standards of all Canadians will improve.”
The BDC study, titled “Built for performance – Discover strategies used by Canada’s leading SMEs,”finds its imperative more Canadian businesses follow in the footsteps of these top performers in order to improve the economy and identifies specific strategies businesses should adopt to improve their performance. For example:
- Top-performing smaller businesses (those with under $2 million in annual sales) should focus chiefly on growth, allowing them to achieve economies of scale and productivity gains that will help improve profits. Those profits can be reinvested, leading to a virtuous cycle of improvement and competitiveness gains.
- Successful mid-sized businesses ($2 million to $10 million in sales) should invest more in machinery and equipment, particularly information and communications technology, as well as intangible assets such as patents and employee training. The investments will help these businesses become more competitive and innovative.
- Leading larger businesses ($10 million to $100 million in sales) should expand even more internationally, which diversifies their revenue sources, reducing risks, and leads them to become more competitive.
Other things top-performing businesses do well:
- They are more efficient and productive based on measures such as sales per employee and operating expenses for sales. This allows them to be more profitable.
- They invest more. For example, in the transportation sector, top businesses invest nearly two times more in computer hardware and software than other companies.
- They foster innovation through investments in intangible assets such as R&D, patents and training. (This finding is interesting in light of a 2017 BDC study of SME investment intentions, which identified a long-term shift in the way Canadian businesses invest, with significant increases anticipated in spending on intangible assets.)
- They develop leadership and management skills. This can happen via coaching and adoption of management systems, such as strategic and financial planning and performance indicators. “Managerial skills are clearly behind the strong performance of these businesses,” the study says.
- Among sectors, those with the highest share of top SMEs include wholesale trade, manufacturing and retail trade. Canadian manufacturing SMEs rank behind their U.S. counterparts in terms of managerial skills, but they outperform those in Germany, the UK, France, Mexico and China.
BDC is the only bank devoted exclusively to entrepreneurs. It promotes Canadian entrepreneurship with a focus on small and medium-sized businesses. With its 118 business centres from coast to coast, BDC provides businesses in all industries with financing and advisory services. Its investment arm, BDC Capital, offers equity, venture capital and flexible growth and transition capital solutions. BDC is also the first financial institution in Canada to receive B Corp certification. To find out more, visit bdc.ca.