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Sunshine Coast Small Business: A Looming Crisis?
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03-31-2014, 01:32 PM,
(This post was last modified: 03-31-2014, 01:40 PM by Skook.)
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Sunshine Coast Small Business: A Looming Crisis?
There has been much ink expended on a looming crisis in residential real estate as baby boomers begin to contemplate downsizing or cashing out the equity in their homes. As these homes are thrown on the market, the questions raised are: a) how will this impact home prices and b) who will buy these homes.
What is not getting the same amount of attention is that thousands of small business owners throughout the province and across Canada are baby boomers, too. They are now preparing to retire and hope to pull out whatever equity they can after years of operation. This issue, as well, raises important questions: a) again, who will buy and b) if they can’t find buyers and shut the businesses down, what will be the financial impact not only on the owners, but on the communities dependent on these businesses. In cities with large populations, these issues may have little importance; however, the same cannot be said for smaller rural communities. I have been following the commercial listings on the Sunshine Coast since last summer and this crisis has begun. I know from living on the coast that many of the businesses that have been put on the market are due to the owners wanting to retire and these listings aren’t moving. Now, this is a social issue the weekly newspaper should and could be writing about without losing advertising dollars. There is one agency that has recognized this looming crisis - Community Futures. For those not familiar with CF and its role in rural communities, here is how it defines itself: Quote:The Community Futures Network was established in 1985 by the Federal Government in response to the severe economic and labour market changes faced by rural Canadian communities. Each Community Futures office delivers a variety of services ranging from strategic economic planning, technical and advisory services to businesses, loans to small and medium- sized businesses, self-employment assistance programs, and services targeted to youth and entrepreneurs with disabilities. The Community Futures Network in British Columbia is comprised of 34 locally and strategically positioned organizations who share a common vision to create diverse, sustainable communities by supporting local, community based economic development. Since its creation, the network has had significant impact on the socio-economic development and diversification of the rural communities it serves. CF’s response to this looming baby boomer crisis was to launch a project called ‘Venture Connect’ and that project has now been turned into corporate subsidiary of CF: Quote:Venture Connect began as a project created in response to the challenge that over the next 20 years, there will be unparalleled shortfalls of both business owners and employees resulting in potential closure of large numbers of small businesses throughout the province. The project was supported by BC Ministry of Jobs, Tourism and Innovation, BC’s Small Business Roundtable, Island Coastal Economic Trust and six Community Futures organizations throughout Vancouver Island and the Island Coastal region (this includes Powell River and the Sunshine Coast). Now, Venture Connect is a corporation; a subsidiary of 6 Community Futures offices and is governed by a 12 member Board of Directors. Two Venture Connect website blog posts from 2012 are worth quoting here for the statistics offered and the issues raised. Quote:Projections for Rural Community Growth There has been quite a heated debate over immigration this past weekend on our sister site ‘Vancouver Condo Info’ and I have no intention jumping into the fray. What I will say, though, is that likely 99% of those offering their “opinions” live in the lower mainland and have no true appreciation of the looming crisis facing rural communities. New immigrants may be the only solution to saving rural economies and services. Let’s return to Venture Connect. The purpose of its website in general is to match sellers of rural businesses with potential buyers. As of today, here what the website shows for businesses up for sale. On the left is BC as a whole and on the right the Sunshine Coast and eastern Vancouver Island. Note: these are only businesses that have posted to Venture Connect. In the image below are actual SC and Powell River businesses currently for sale and posted to VC. The details have been uploaded by the owners or their Realtors; however, they represent a fraction of the businesses currently listed in both areas. (I see a Squamish biz snuck into the SC list - must be looking for an SC buyer - good luck.) In future posts, I will take a more in depth look at some of the Sunshine Coast business listings. The following is a 2012 Community Futures video worth a watch. This is the description accompanying the video: Quote:Since 1946, the baby boomer generation has been the single most power force influencing and changing culture, politics and the economy. The demographic shift that is taking place as baby boomers move into their senior years has far reaching effects. Boomers have powered growth over the past sixty years, but as they retire this group will begin pulling money out of the system rather than pumping it in, and where they put that money will be changing. There will be challenges and opportunities for all of us, our communities and our businesses. I am going to conclude with a picture of three of the seven Sunshine Coast Volunteer Departments from a 2011 Coast Reporter special report. I don’t think I need to comment further except to say these photos highlight the demographic shift facing the SC and all rural BC communities. |
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04-01-2014, 07:32 AM,
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RE: Sunshine Coast Small Business: A Looming Crisis?
Hi Skook
This phenomenon became much more pronounced in the UK after the 2007-2008 financial crash. And forgive me, but as a Canadian/Scot I am going to insist on the UK being that country which is NOT London; how many times have I heard people say "Oh but I was in London last week and..." here in Toronto whenever I try to explain the mess Britain is in. What happened was this; home equity collapsed by 30% in real terms, 15% unadjusted over 5 years. The effect has been MASSIVE closures in the retail and services sectors (and I mean Massive; at one point, there were firesales in liquor stores, etc, simply because the bank had pulled the plug and the companies were ruined). And a lot of that equity was held by boomers as you say. However, as we now move to six/seven years after the crash, what's interesting is how both buyers and sellers of goods and services have simply downgraded their expectations. So whereas a restaurant meal for two might have cost GBP 30-50 in Edinburgh in 2007 (without wine) that same meal, with smaller portions and less fancy ingredients, can now be had for GBP 20-40. More specials and offers abound. Overall, people have survived and -- this bit is anecdotal -- started doing more stuff that costs less, like spending time with friends and family instead of going on fancy skiing holidays, etc. I expect a similar pattern in BC and Canada in the period between now and 2020. Trust me, some bits of it are truly horrible. But society comes out the other end poorer, yes, but arguably chastened and less pretentious and overblown. Just my 0.02c! Jimmy |
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04-02-2014, 09:31 AM,
(This post was last modified: 04-02-2014, 10:41 AM by Skook.)
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RE: Sunshine Coast Small Business: A Looming Crisis?
Excellent post, Jimmy. Thanks for sharing this anecdotal evidence because like you I think it illustrates what is likely to unfold here; and I, think it is now underway.
Much has been written about the personal debt loads Canadians are carrying with the most recent update appearing in this CBC new story, ‘Consumer debt snowballs to $1.4T: Canadians' debt load rises 4.5% in 4th quarter of 2013 and 9% year-on-year’. Quote:Total consumer debt increased by 4.5 per cent between the third and fourth quarters of 2013 and by 9.1 per cent when compared with a year earlier, when Canadians owed a total of $1.303 trillion. So, this news story seems to indicate Canadians are managing to meet their obligations and many RE blog commentators have queried, “How is this possible?” and “Why aren’t personal bankruptcies increasing?” Well, the answer to that last question appeared in a Globe & Mail piece two days ago, ‘Canadians opt to negotiate debt woes, skip bankruptcy’. Quote:For the 12 months ending Jan. 31, total consumer insolvencies – which includes bankruptcies and proposals in which a negotiated deal with creditors is struck – decreased by 0.5 per cent compared with the 12-month period ending Jan. 31, 2013, says the Office of the Superintendent of Bankruptcy Canada. However, BC residents appear to be bucking this trend to negotiate debt, according to a March 11, 2014 Vancouver Sun, Barbara Yaffe story,‘Vancouver residents play with fire over debt’. Quote:…B.C. is the only province west of Quebec that, in the past year, has not registered a decline in bankruptcies and consumer proposals (the latter involves a proposal for partial repayment of debt). Now, what about businesses? I turned to the Office of the Superintendent of Bankruptcy Canada report that is the basis for the March 31st Globe & Mail story. (Highlighting is mine own) Quote:The total number of insolvencies (bankruptcies and proposals) in Canada increased by 8.2 percent in January 2014 from the previous month. Bankruptcies increased by 2.3 percent, whereas proposals increased by 16.5 percent. So, Jimmy it looks like Canada is well on its way to mirroring what occurred in the Britain after the 2007-2008 financial crisis. Thanks for drawing our attention to the future. I think your $0.02c worth has jumped substantially in value. |
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04-02-2014, 01:27 PM,
(This post was last modified: 04-02-2014, 02:44 PM by Skook.)
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RE: Sunshine Coast Small Business: A Looming Crisis?
I blush, sir Skook - but thanks anyway. Of course, the big difference between the two countries is the functioning primary manufacturing/extractive industries economy in Canada, better immigration controls, lower debt and deficit levels and an absence of overdependence on financial services. So overall I would expect the impact to be less pronounced. I am of the view, by the way, that the UK government very narrowly avoided complete economic collapse in 07/08 - so saying that the impact will be less pronounced is arguably saying less than people might think.
Let's see what happens! Jimmy (04-02-2014, 09:31 AM)Skook Wrote: Excellent post, Jimmy. Thanks for sharing this anecdotal evidence because like you I think it illustrates what is likely to unfold here; and I, think it is now underway. |
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04-06-2014, 03:56 PM,
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RE: Sunshine Coast Small Business: A Looming Crisis?
Guys
Wanted to follow with another anecdote from what Garth T calls "godless 416" - downtown Toronto... We live in High Park, one of the better, but by no means Rosedale or Bridle Path, 'hoods in TO. Anyway, the recent exchange of posts with you guys led me to some musings as I was out and about getting groceries with my wife and our little one. I decided to tally up failed businesses on our local high street. The short answer is five businesses have gone down since the start of the year out of perhaps 40 in that precinct. What's of note, maybe, is that four of those failures have been in the past month. Also, two or three other stores are taking "extended breaks for family reasons" - there seems to be a lot of that about - do you not pay taxes as a small business owner in TO if you are not operating? I guess it would make sense if you are not getting paid. also you don't have overheads if you shut up shop and go away for two months. A further 0.02c from this exiled BC person - Jimmy |
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04-12-2014, 07:07 PM,
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RE: Sunshine Coast Small Business: A Looming Crisis?
Hey Jimmy,
Sorry for not being able to respond sooner. I was wondering about those 5 businesses that have shut down for good - can you recall what type of business they were; just curious. As for those businesses on extended leave, I was thinking if you have high overhead and low sales then you likely don’t have staff to cover you if you want to take off on holidays. Or, if you do have any staff, you would they might lay them off while away. Or, if those few months after the New Year are traditionally slow, it might be more cost effective to shut down for those months. Pubs & Restaurants in the Pender Harbour area and north to Earls Cove and Egmont have been doing that for years. They usually begin closing after September and may not open again until mid- May. There would be no break on your business taxes to the municipality. You would have less income tax to pay at the end of the biz year. No credit card fees to pay but you would still have to pay for the terminal rental if you don’t own it outright and those credit card accounts often have a monthly minimum especially for debit cards . Your bank biz account fees would still need to be paid each month. You would still have to pay your rent, water, min hydro and heating costs, phone bill. I know all about the operation cost of running a small business - the most depressing costs are those banking and credit card fees. So, these businesses must be able to manage on 6- 10 months a year, I guess. Did you really blush? ![]() |
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04-14-2014, 04:30 AM,
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RE: Sunshine Coast Small Business: A Looming Crisis?
Hi guys
Over the last week there's actually been another two business failures - a roast chicken shack and a budget clothing retailer (and I mean budget - selling overstock out of boxes, etc). The ones that have closed apart from these have been: a guy who ran a place called "The Pie Shack", which basically reheated and sold fruit pies made elsewhere at huge profit with lousy coffee and lipton's ice tea from a can; a great central American cafe whose owners pulled the "family emergency" ace from the hole (possibly true in this case, since the workers there seemed to have no idea); a West Indian roti shack and another clothing retailer. So very much what are, as I said to my wife, "boom businesses" - ie stuff that goes well when folks have money to spend. My next hunch is probably just because I'm looking for it, but I sense/smell a tapped out consumer here in TO. I also note listings on Bowen are up 5% this week alone to 77, and there's a lot of what one might call week-old fish in there: things that didn't sell last year or the year before which are back on. In one case, the price for an estate is now off from $3m last year to $2m this - 33% drop, but still way, way out of my price range. I stick with my estimate, made elsewhere in the blogging community, that some of the more outrageously-priced homes in Greater Van, esp burbs, are going to see drops in the order of 70-80%. But all that will speak to is the nuttiness of the now-fading pricing order... Jimmy, your correspondent in Godless 416... |
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05-04-2014, 09:30 PM,
(This post was last modified: 05-04-2014, 09:41 PM by georgie girl.)
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RE: Sunshine Coast Small Business: A Looming Crisis?
(04-02-2014, 01:27 PM)JimmyWW Wrote: I blush, sir Skook - but thanks anyway. Of course, the big difference between the two countries is the functioning primary manufacturing/extractive industries economy in Canada, better immigration controls, lower debt and deficit levels and an absence of overdependence on financial services. So overall I would expect the impact to be less pronounced. I am of the view, by the way, that the UK government very narrowly avoided complete economic collapse in 07/08 - so saying that the impact will be less pronounced is arguably saying less than people might think. so we have a reported sale of small businesses of between 15-30 sold since january to off shore individiuals from China....Sechelt Golf Club, large land deal in Tuwanek and any number of small businesses which is the Federal government program of doing this allows you to enter Canada....not sure of details but i have heard the business must sign a contract and offer to train for a year.....buyer must run business for 2 years and then walk away....its a way to get into Canada..these by the way are just what i heard and not official....i have a list personally of 10 businesses....a friend of mine told me she could not sell to the Chinese who are coming in droves to the Sunshine Coast because the business had to be in existence for 5 years.....So what does this mean>>>>problem here is their is no knowledge outside of Sunshine Coast that it exists.....zero marketing... Lots of talk of building bridges, tunnel etc....but i have been in ad agency business for 30 years and see nothing going on to attract people.....will the chinese stay on the coast? or simply leave after required time period and go to Vancouver and Richmond.....Real estate is depressing....i see no catalyst for improvement...welcome comments |
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05-19-2014, 05:13 PM,
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RE: Sunshine Coast Small Business: A Looming Crisis?
I think you've hit the nail on the head. We're merely seeing a variation of the Hong Kong brain drain of the 80's.
With 1997 looming those that had money, blood relations in Canada or qualified through other schemes emigrated to Canada in droves. Some bought businesses they knew they weren't qualified to run - but considered it the cost of getting a new passport. It was money down the drain to them. They put in their 3 years (actually most didn't. They'd fly in, get their passport stamped, travel to Seattle, fly out and return to Canada via Seattle - while appearing to stay in Vancouver to meet residency requirements) got their Canadian passport and headed straight back to HK to pick up where they left off. There was little commitment to Canada or the business they had bought. While selling to a Mainland buyer might be a relief to the business owner selling, there will be little benefit to the Sunshine Coast community over the long term. The Golf Club will likey be okay as I believe this is a consortium buy and a business investment - not an individual looking for a passport. |
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06-14-2014, 06:01 AM,
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RE: Sunshine Coast Small Business: A Looming Crisis?
Report from a friend who regularly visits Victoria:
"Back from Victoria last evening. Warm and swarming with tourists and tour bus groups. Retail must be slow, as both many vacancies and “clearance” sales on Government St. One merchant I know told me that there is little tourist spending.... The cruise ships are catering to mom and pop who have no extra money for overpriced stuff..." I find these 'anecdotal' reports more revealing than lots of 'official' research reports that everything is fine... |
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