Renewing Established Businesses
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S ON TI SI N A R T S S E IN S U B & S T N A R G I M M I N O H C R A E S E R A W A T T O C P E L - F L C O ReNEWing Established Businesses STUDY FINDINGS & RECOMMENDATIONS FOR MOVING FORWARD Submitted by: Ottawa Community Loan Fund and Ottawa Employment Hub ReNEWing Established Businesses - Ottawa Research on Business Transitions 1. Introduction PROJECT BACKGROUND & APPROACH The Research Project & Approach The Ottawa Community Loan Fund (OCLF) and Ottawa Employment Hub, the Local Employment Planning Council (LEPC), collaborated on a research project called “ReNEWing Established Businesses” from November 2016 to December 2017. The study explored the potential of bringing together immigrants interested in running a business in Canada with small and medium enterprise (SME) owners who are looking to exit their businesses. ReNEWing Established Businesses (ReNEW) examined these two common labour market challenges and explored the potential for a mutually beneficial solution: 1) Immigrant under- and un-employment; and 2) Lack of succession planning among small and medium enterprise (SME) owners. There are hundreds of motivated, skilled immigrants in Ottawa who cannot find jobs. Meanwhile, many SME owners are retiring without a succession plan and are therefore closing their shops. The closing of successful businesses means fewer services for residents, negatively impacting the quality of life in the community. Moreover, it is a missed employment opportunity for under- and unemployed immigrants. ReNEW explored the potential for immigrants to solve the problem of SMEs closing, while creating a job for themselves in the process. The project also looked at financing options to make this possible and focused on several key areas in examining the issues and moving toward solutions: 1. Understanding the current Ottawa picture in terms of immigrant employment, SME ownership and succession planning, and financing options. 2. Exploring promising approaches in bringing together buyers interested in running a business with SME owners who are looking to exit their businesses. 3. Gauging the interest and perceived challenges from both the recent immigrants (potential buyers) and the SME owners (potential sellers) in Ottawa. 4. Scanning programs and services offered in the community to identify potential gaps and what could be leveraged moving forward. 5. Formulating recommendations and considerations for moving forward based on the research. The Project Team OCLF is an incorporated non-profit organization working for financial empowerment in the Ottawa area. OCLF arranges loans to start, buy, or expand businesses, and professional development loans to increase employability. OCLF also provides education in money management and entrepreneurship training. Ottawa Employment Hub is a provincial Local Employment Planning Council (LEPC) pilot that promotes place-based approaches to workforce development, while generating and analyzing local labour market information. The LEPC, funded by the Ontario Ministry of Advanced Education and Skills Development ReNEWing Established Businesses – Study Findings & Recommendations for Moving Forward 1 ReNEWing Established Businesses - Ottawa Research on Business Transitions (MAESD), has worked with more than 150 community partners in the past year toward modernizing employment and training programs and services. Although both organizations contributed to the overall project, OCLF’s main role in this study was to conduct research on financing options and gather information from the potential Buyer side (immigrants). LEPC’s main focus was to research labour market statistics and promising approaches, as well as gather information from the potential Seller side (small business owners) and explore current community programs and services to leverage. Project Plan and Key Milestones To undertake the study, OCLF and LEPC conducted both primary and secondary research, including surveys, dialogue sessions, and “best practice” interviews. Close to 100 people in the community and across the country shared their learnings and views. The graphic below captures the key activities and timelines that guided the research. KEY ACTIVITIES & TIMELINES Literature review of supporting research on need and feasibility Analyze data Best practices through research and interviews Validate data and inform next steps in dialogue sessions Review of financing options July–Sep. 2017 Dec. 2017 Nov. 2016 – June 2017 Oct. 2017 Survey local potential immigrant buyers Produce a report on key findings and recommendations for moving forward Survey local potential sellers Scan local programs and services Report Content To summarize key findings and share our recommendations for moving forward, this report includes: 1. Introduction (pages 1 to 2) - Project background/approach and report content. 2. The Current Picture in Ottawa (pages 3 to 5) - Immigrant employment, business ownership/ succession planning, and financing options. 3. Key Learnings from “Best Practice” Research (pages 6 to 7) - Promising approaches and lessons learned in bringing together buyers interested in running a business with small and medium enterprise (SME) owners. 4. Input from Ottawa Buyers & Sellers (pages 8 to 11) - Gauging interest and perceived challenges from recent immigrants (potential buyers) and SME owners (potential sellers) in Ottawa. 5. Programs and Services to Leverage (pages 12 to 14) - Scanning programs and services offered in the community to identify potential gaps and what could be leveraged moving forward. 6. Recommendations for Moving Forward (page 15) - Formulating recommendations and considerations for moving forward based on the research. ReNEWing Established Businesses – Study Findings & Recommendations for Moving Forward 2 ReNEWing Established Businesses - Ottawa Research on Business Transitions 2. The Current Picture in Ottawa This section provides an overview of the current landscape in Ottawa around immigrant employment, SME ownership and succession planning, and financing options. We have supplemented local data with provincial and national findings where Ottawa-specific information was not available. IMMIGRANT EMPLOYMENT Immigrant population in Ottawa In 2016, 26% of Ottawa’s population over Ottawa population, aged 15+, by period of 15 years old were immigrants. immigration, 2016 Non-immigrants This represents 208,695 people, Established immigrants (arrived more than 10 years ago) with 48,795 having arrived in past Recent immigrants (arrived 5 to 10 years. 585,210 10 years ago) Very recent immigrants (arrived 24,190 arrived less than 5 years less than 5 years ago) ago. 75% of Ottawa immigrants aged 25 to 64 in 2016 had a Postsecondary 159,900 24,190 certificate, diploma or degree 24,605 arrived less than 5 years ago (compared to 73% for non- Source: 2016 Census, Table 98-400-X2016194. immigrants). Immigrant employment and under-employment 121,565 employed immigrants in Ottawa in 2016; however, 2016 unemployment rate by immigrants still see higher rates of unemployment. number of years in Canada 8.0% unemployment rate for immigrants (compared to 6.6% for non-immigrants). 15.2% unemployment rate for immigrants arriving in the past 5 years. (Source: 2016 Census, Table 98-400-X2016286) Full-time employment status and median income are both lower than for non-immigrants. 83% of workers aged 25 to 54 are full-time (compared Source: 2016 Census to 90% for non-immigrants). $37,007 median income for immigrants (compared to $43,419 for non-immigrants) (Source: LFS and 2016 Census, Table 98-400-X2016205) ReNEWing Established Businesses – Study Findings & Recommendations for Moving Forward 3 ReNEWing Established Businesses - Ottawa Research on Business Transitions OWNERSHIP AND SUCCESSION PLANNING In this section we focus specifically on small and medium-sized enterprise (SMEs) – businesses with 1 to 499 employees – but emphasize those with 1-10 employees as these are likely most suited for purchase by new immigrants to Canada with limited finances. Ottawa businesses and owners 28,446 small businesses in Ottawa in National and Provincial Studies 2016 (1-100 employees); 21,178 with Grocery stores and Restaurants are popular less than 10 business ownership choices for immigrants in Over half of SME owners aged 50+ Canada (Source: Statistics Canada, “Immigrant Businesses in Knowledge-based Industries”, 2017) 30% of SME owners born outside A 2017 study of business ownership in Canada Northern ON found a tendency for immigrant Top 5 sectors (1-10 employees): entrepreneurs to purchase existing businesses/ 1. Computer systems design and franchises (Source: The North’s New Entepreneurs) related services An Ontario study explored immigrants’ 2. Offices of physicians perspectives on buying an existing business 3. Management, scientific and (Source: Wise5: Winning Strategies for Immigrant technical consulting services Entrepreneurs) 4. Full-service restaurants and limited- Most appealing aspects: service eating places o The business is already established 5. Residential building construction o Less innovation is required (Sources: Dec 2016 Canadian business counts; Least appealing aspects: 2014 Survey on Financing and Growth of SMEs) o Motivation of vendor may be unknown Business transitions 21% of 2017 Ottawa Business Growth National Studies and Data Survey respondents plan to exit business 75% of SME owners in Canada expect to exit within 5 years; only 13% have well- their business within 10 years; half of these documented succession plan looking to