The end of COVID-19 pandemic restrictions and ensuing economic recovery has not meant clear skies for Canadian small business owners like Ryan Dunne.
Dunne and his wife Polly run Winchester Catering and Events, a business they bought four years ago in the small eastern Ontario township of Winchester.
As Ryan Dunne tells Global News, the family had one year of normal operations before the COVID-19 pandemic struck in March 2020 — the month that marked the beginning of rolling lockdowns and acute limits on gatherings like weddings and regular business operations for Winchester Catering and Events.
That new economic reality struck the fledgling business owners hard.
“I thought that was just going to be the end of it,” Dunne says, recalling how the family put most of its savings into the new business with hopes it would turn a profit by year three or four.
“But once the pandemic hit, I didn’t think we would get four or five months down the road before we’d have to walk away from it.”
But Winchester Catering and Events did last. The property was backed by a mortgage from a private lender, whom Dunne says was “very, very reasonable” on payments in the early days before government support started to flow.
The Dunnes converted a bed and breakfast they hosted on the site to a long-term lease, and took on debt as a stopgap for the business’s other revenue holes. The family business pivoted to cater corporate holiday parties in the winter with individually packaged turkey dinners.
“It was basically just me and my wife and my kids,” Dunne recalls. “They’d all be in here slicing turkey and doing cranberry sauce portions and all that stuff and whatever we could do. And we managed to just scrape by.”
On the other side of pandemic lockdowns, Dunne says weddings haven’t quite been the same. Events that used to cater to 120-150 people now routinely bring in 50-60 guests, he notes.
On top of that, loans taken out as lifelines during the pandemic need to be repaid soon. And that mortgage needs to be renewed next year, with interest rates having now climbed to highs not seen in more than two decades in Canada.
That looming renewal, on top of the slow-to-recover business and outstanding debts, might end up being the “nail in the coffin” for Winchester Catering and Events, Dunne says.
“I think for most people the pandemic is over. But for people like me, we’re experiencing the hangover,” he says.
Historic drop in self-employment
Recent surveys and data show that Dunne is not alone in facing renewed hardship in the aftershocks of the pandemic.
The latest Labour Force Survey from Statistics Canada shows the country lost nearly 40,000 self-employment positions in May.
That’s the biggest drop Canada has seen since the early days of the pandemic in April 2020 and the fourth-largest decline over the past decade, according to an analysis from BMO’s Benjamin Reitzes.
Reitzes cautions reading too much into data from a single jobs report. But he adds that while the public and private sectors have seen year-over-year gains in Canada’s hot jobs market over the past year, self-employment has continued to decline.
“Self-employment more broadly has remained relatively depressed since the pandemic,” Reitzes tells Global News.
Perhaps counter-intuitively, Canada’s tight labour market might be part of the reason fewer Canadians are opting to go it alone or start their own business, he says.
With Canada’s low unemployment rate and a high number of vacancies at Canadian employers, workers might be less inclined to opt for self-employment because they can get plenty of opportunities in the private sector, Reitzes explains.
May marked the first uptick in Canada’s unemployment rate so far in 2023, rising to 5.2 per cent from 5.0 per cent, which was just above record lows. Reitzes says that additional weakness in the labour market is expected as the economy is projected to cool in the months ahead, which could push some out of their existing jobs and into entrepreneurship.
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“Self-employment just isn’t quite as attractive at the moment,” he says. “But we are expecting to see some softening and that could lead to a higher self-employment number in the months ahead.”
Simon Gaudreault, chief economist and vice-president of research with the Canadian Federation of Independent Business (CFIB), says that a tight labour market might not necessarily be good for the economy given the “very concerning” drop in self-employment.
The vast majority of employers in Canada are small businesses, Gaudreault says, giving independent businesses an outsized impact on overall employment in the country.
“We need self-employed people, we need entrepreneurs. We need people who will be willing to start things from scratch or people who will be willing to be part of a business succession process,” he tells Global News.
An uptick in unemployment, potentially driven by a recession that some economists have in their forecasts for 2023, isn’t necessarily the solution for Canada’s self-employment woes, Gaudreault notes.
While some might choose to start a business or strike out on their own when they’re forced to, others find opportunity in periods of economic growth when capital is more readily available and consumers are spending freely, he says.
“It’s difficult to say (whether) self-employment will be driven by recessions or will be driven by economic booms.”
Calls grow for more support for businesses on the edge
Gaudreault notes that many small businesses, like Winchester Catering and Events, are still carrying debt from the pandemic. CFIB calculations put the average debt load at around $100,000.
Meanwhile, only 44 per cent of these small businesses are back to their pre-pandemic revenue levels, according to surveys of CFIB members in May.
Given the bleak outlook for the economically critical sector of the economy, Gaudreault says he’d like to see more government support directed towards small- and medium-sized businesses, rather than funding designed to lure big foreign companies to put down roots in Canada.
“Perhaps what we need right now is governments acknowledging that more strongly and making sure that when they talk about economic policies and Canada being a competitive place and an economy of the future, it’s not necessarily just about the giants, but it’s about having the smaller and medium-sized players being able to compete with a more friend friendly business environment,” he says.
“Perhaps when we have that, it will be a strong signal for people who are willing to take over a business or start their own and become self-employed.”
Dunne, too, would like to see recognition from governments about the impact the COVID-19 shutdowns had on businesses.
Regardless of the public health imperatives that informed the government mandates, Dunne says it’s unfair that there’s been little relief on property taxes, for example, for businesses that were unable to earn revenues at all for months at a time.
“The fact was that they closed our businesses. They didn’t give us a chance to create commerce, and then they still expect us to pay,” he says.
The federal government extended repayment deadlines for Canada Emergency Business Account loans by a year to Dec. 31, 2023. Finance Canada did not answer a Global News inquiry earlier this month about whether that deadline would be extended again amid pressure from CFIB to provide more relief for businesses.
The summer is looking brighter for Winchester Catering and Events, with weddings booked through the fall. But Dunne says he knows when the winter months creep in, he’ll have to make hard decisions about the future of the business.
“When we start to look at renewing our mortgage and our debt on all of our loans and stuff are going to come due, I don’t like to think about those days,” he says.
Asked whether he’s considered calling it quits given the grim outlook, Dunne has a blunt response that might sum up one big factor keeping the entrepreneurs Canada does still have in the game.
“Nope, I’m too stubborn.”
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