Diversification key to business survival: Survey
CALGARY -- A survey done by the Business Development Bank of Canada (BDC) paints a dismal picture of the confidence companies have in the coming year.
59 per cent said they have been negatively affected by falling oil prices, while 75 per cent say they pandemic has negatively impacted their business.
Perhaps the most concerning finding is that, of companies working in the oil and gas sectors only 66 per cent think they will survive the next 12 months. It is the lowest business confidence of any sector in the Canadian economy.
“We are well aware of the fact that the oil price collapse and the pandemic hit at the same time, and is really, really having an impact on the businesses in Alberta.” said Pierre Cléroux, Chief Economist with BDC.
“The recession, and the pandemic has been really hard. The lost revenue, half of SMEs,(small and medium enterprises) they had to lay off people.”
Diversification is key
Cléroux said the key for businesses to survive a recession - no matter the cause - is diversification, not just of the products or services they sell, but in their clients, and physical locations.
Risk Sciences and Development launched its quest to diversify during the last oil price collapse in 2015. The company supplies risk management, predictive analytics. and process safety training.
“We used to be 90 per cent, oil and gas, so the last downturn was major," said company CFO Wilson Xu. "Our revenue in 2015 got slashed by 70 per cent, so we needed to find new ways to break through the oil and gas limitation that we have in our business.
"Since then," he added, "we’ve been building technology, that really helped us to tap into different industries, pharmaceutical, food processing, cannabis, and pulp and paper. Not only in different industries, but also different clients from different geographical locations around the world.”
As a result of the changes Risk Sciences and Analytics was one of the few companies positioned to find opportunity and growth, rather than contraction after the pandemic was declared.
“We have - just since COVID started - we've actually hired half a dozen new people," Xu said, "right from heads of research and development on and we continue to hire new people."
Tom Labodi, the President of Risk Sciences and Development said “COVID allowed us to redeploy our resources and focusing on gathering data from around the world, and getting it into our repository.
"Because of that," he said, "we're now attracting more and more clients from around the world - so it's (the pandemic) actually been a bit of a blessing in disguise.”
Companies surveyed by BDC said the biggest impediments to diversification were” finding new markets or clients (55 per cent), the lack of qualified personnel (17 per cent), cost (16 per cent) and development of new products (15 per cent) the high cost of diversifying".
Cléroux said despite those difficulties, companies should make the investment if they hope to be a long term survivor in today’s business world.
“If you serve If in any sector, but especially in oil and gas, if you are able to diversify the product that you sell, or to diversify to other sectors to try to extend the market you have, for example, to advertise, to other parts of the world, ithis is actually preventing or protecting you against the cycles of the economy."
"And right now," he added, "we are at the bottom of the cycle.”