Small business owners in Canada don't know their worth: survey

Small businesses are considered the engine of the Canadian economy, but many are sputtering because they don’t know their worth, a new survey shows.

The study from Intuit Canada says 39 per cent of small business owners don’t think they’re selling their goods and services at market value. About one in four believe they’re undercharging, while 15 per cent may be overcharging, says the survey released during what is now Small Business Month in Canada.

By not knowing how to accurately value what they sell, the report says small business owners are missing opportunities and risking their chance of success over the long term.

“If you are undercharging for something you put your blood, sweat and tears into you are undermining your business,” says Rob King, director of small business at Intuit Canada, which develops financial management and tax software such as TurboTax and QuickBooks.

“That means not being competitive or as profitable as possible.”

King points to Statistics Canada data showing that half of new Canadian businesses close before they hit their fifth year. That is down from a 70-per-cent survival rate in the first two years and 62 per cent in the first three years.

The StatsCan report notes businesses that do pass the five-year mark “are able to attain competitive advantage in their markets.”

King believes the failures are due in part to the owners’ lack of financial knowledge.

The survey shows 12 per cent of respondents believe their lack of financial knowledge and tools is a barrier to the business taking off. It also says 87 per cent of small business owners manage their own business books, and only 51 per cent use an accountant or bookkeeper.

King has three recommendations for small businesses trying to survive:

1. Get educated: There are a growing number of resources for small business owners looking to ramp up their financial literacy. Some provinces, such as B.C. for example, have small business organization that offers courses on everything from incorporation to taxes and marketing. Many also offer free resources for small business owners. Intuit has also partnered with CPA Canada to develop a financial literacy curriculum, starting this fall, that is geared to small businesses.
   
   

2. Get some help: King recommends hiring an accountant or bookkeeper to help track your finances. These experts can also offer tips on how to handle expenses specific to your business. That could help save you money, not to mention lower your tax bill.
   
   

3. Get the right tools: King of course recommends his company’s accounting software, but there are many options out there for small business owners to choose from. The key is to find resources that will help you track and better organize your company’s revenue and expenses. The goal is to help you get out from under that pile of paperwork and spend more time running your company.