Tug-of-War: Canada’s Small Business Community & Rolling Restrictions

Here’s an often-quoted statistic: 20 per cent of businesses don’t survive in the first two years of their opening. Five years go by and that number balloons to 45 per cent. Give it ten years, and that’s 65 per cent. Only a quarter of these businesses make it to their 15th birthday.

This is a stat from the U.S. Bureau of Labor Statistics, though Canadian businesses see similar risks of failure and withstand many start-up challenges in any given year.

Problem is, 2020 wasn’t ‘any given year’.

When the COVID-19 virus hit Canada in March, the restrictions designed to keep transmissions low in the hardest-hit provinces like Ontario and Quebec set in by the end of the month. It didn’t matter if your small company just launched this year or if you had been in a family business for generations, many retailers and restaurants saw a 100 per cent drop in their revenues. Some were lucky and had an established online presence they could keep processing orders from, others had to scramble in their pivot to curbside pick-up.

Others were much less fortunate.

There were supports immediately made available to individuals and businesses during the pandemic, such as:

  • Canada Emergency Relief Benefit (CERB): Arguably Canada’s most popular support, CERB offered $2,000 a month to those who jobs their jobs or had their hours dramatically reduced.
  • Canada Emergency Wage Subsidy (CEWS): A support that would cover 75 per cent of employee wages with employers topping off the rest.
  • Canada Emergency Commercial Rent Assistance (CECRA): Provides rent support to business owners through financial assistance to commercial land owners, covering a minimum of 75 per cent of the tenant’s rent. Tenants and commercial owners would both cover 25 per cent.
  • Canada Emergency Business Account (CEBA): Provides an interest-free loan of about $40,000 for business owners. Paying back 75 per cent of the loan by December 31, 2022 will give the borrower a loan forgiveness of up to 25 per cent.

For many business owners, these supports were a lifeline, and they couldn’t imagine how they would have gotten by without them. However, they were not without faults: many applicants described website crashes, unclear instructions of how to apply (and some of the unintended effects, like finding out they actually didn’t qualify and having to pay back a large sum after the support money had been spent), not being eligible, or the supports just fell short of giving business owners what they needed to stay afloat. This was particularly the case for CECRA, which found many landlords unwilling to participate in the program and left business owners in the lurch.

The pandemic had wreaked havoc on small business communities across every major city, with revenues falling to near-zero while these entrepreneurs were still expected to pay for sky-high commercial rents, taxes, insurance premiums (which was pushed higher by insurance companies on the added COVID-19 risk), remaining staff, and pivoting costs (which could include starting an online platform or make a store COVID-safe with expensive plexiglass barriers and PPE).

Businesses that people and families put their entire savings and lives into were being swallowed into a relentless black hole of debt, zero-income, and fewer prospects for growth with seemingly no relief in sight.

By the summer, Canadians began returning to public life – some timidly, others with a fervent pent-up demand. Retailers opened their stores again to masked customers who minded their six-foot distancing. Outdoor patios saw customers enjoying a pint in the sun, albeit in the presence of shielded wait staff.

Strolling the downtown Toronto streets for the first time in months, many dismally noticed the rows of boarded-up storefronts as they passed. It was around this time the Canadian Federation of Independent Business (CFIB) was estimating that one in seven businesses would close with a mid-range of 158,000 closures. Worse still, this figure could reach as many as 218,000, their report explained. The first wave of cases in many provinces appeared to have ebbed for the time being, though the concerns surrounding a second wave lurked in the back of many people’s minds.

Retailers had their sights set on the holiday season – the highest-earning season. This prompted business owners to stock up on holiday inventory – an amount that would have been excessive for any other time of year, but necessary for Christmas shopping. This could also leave many of them vulnerable with an excess of stock if they couldn’t offload it quickly.

Cases across Canada began to spike again, this time more intensely than the first wave. Some took this as a troubling sign of complacency, others argued that the rate was higher relative to the first wave because testing had significantly improved.

In either case, “COVID fatigue” started to set into many Canadians – but no more than the small business owners who were wary of a new set of restrictions that were on the horizon.

The second wave of COVID-19 cases had provincial governments implementing more lockdown measures: Ontario put Toronto and Peel into a ‘grey zone’, meaning businesses saw much stricter restrictions; Quebec announced that all non-essential businesses would close from Dec. 25 to Jan. 11 in all regions; British Columbia banned social gatherings until Jan. 08 with open doors for restaurants and bars, but have mandatory masks and only six people allowed to enter at a time. Other provinces with a worrying amount of cases implemented their own restrictive measures.

Hearing the stories of many business owners who spoke with BNN Bloomberg, there was a swath of responses ranging from a growing frustration at the lack of clear, proper supports from either the federal or provincial governments to a dismayed understanding that lockdowns were probably necessary to keep the caseloads under control.

When asked for their reactions to the second wave of restrictions, the reaction was always the same: “We were not surprised… but it doesn’t make it less difficult”.

The second set of restrictions didn’t come without some kind of revolt. Anti-lockdown criticisms and protests weren’t rare during the first wave, though you could argue the second wave saw more of a pushback from business owners themselves.

Fitness studio owners in Quebec staged a symbolic re-opening for their studios to show how important their services were to their clients and the broader community. In Ontario, nearly 50 retailers signed an open letter to the Ontario government to reconsider their approach to lockdowns, that is, the re-open all business at a 25 per cent capacity.

More notoriously, you had stories like Adamson’s BBQ with owner Adam Skelly defying public health orders to keep his Toronto-based barbecue restaurant open. The opening brought anti-lockdown protestors gathering in support along with an outsized police presence. It was a media frenzy of protests, counter-protests, and a scuffle – all culminating to an arrest (after which Skelly was later released with $50,000 bail) and Toronto police changed the locks on the restaurant.

The reactions on social media were heavily divided, with many calling out Skelly for being a selfish lawbreaker who puts his profits and media circus over the health and safety of the community; while others saw him as a man fighting against a system that had taken his business from him.

There was a quieter third group that said they agreed with the sentiment, but could not get behind the way he chose to protest. A legal defense fund was arranged on GoFundMe, initially setting out to raise $10,000. It has since blown past $330,000.

Despite all of the pivots, from moving online to changing what these businesses sold; despite the community push to reject Amazon to support local business, small business owners knew they were missing out on the most important season for their bottom lines. By December, the CFIB released an updated survey saying one in three businesses did not expect to make it beyond the second wave.

The loss of the holiday season drew sharp words from prominent retail voices. Indigo CEO Heather Reisman was even advocating for the government to compensate the losses taken on by businesses. In an interview with BNN Bloomberg, she said, “We will get through it, but we do not intend to get through it without some help.”

These struggles carried over into the new year with unsold inventory and ever-mounting debt without any additional revenues or means to pay it down. While these smaller businesses were largely left to struggle, big box retailers and e-commerce giants thrived with having the competitive advantage of remaining open. In Amazon’s case, its massive success over the pandemic was well-reflected in its 37 per cent boost in earnings by the third quarter of 2020.

Ontario’s new set of restrictions came with a declared state of emergency set to last another 28 days, leaving non-essential businesses to limit their hours of operation between 7 a.m. and 8 p.m. and requiring residents to stay at home.  

The restrictions and ‘retail double-standard’ drew the ire of CFIB president and CEO Dan Kelly, who said:

Keeping all of the stories of small business owners in the spotlight reminds us that while we’re looking at 2020 in the rear-view mirror, we are far from seeing the end of the small business woes.

Locked Down During the Holidays

In any given year, running a business is an immensely challenging task – all culminating to a particularly stressful, high-earnings holiday season. The problem is, 2020 wasn’t just any given year. This video explores the challenges faced by small businesses in Canada.

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