Overly optimistic? Canadian private companies forecast 7.6% growth rate

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Companies focus on the domestic market for growth in the next five years

TORONTO, September 26, 2013 — With consistent annual sentiments of confidence and optimism, Canadian private companies have forecasted a 7.6% growth rate at a time when national growth is two per cent, according to early results from Business Insights 2013 — PwC’s latest study on the ownership, performance and issues of over 350 Canadian private companies. The number of private company leaders anticipating growth and expansion has increased since the survey was first conducted in 2005.

“The strong growth outlook is somewhat of a surprise,” says Tahir Ayub, PwC’s Canadian Private Company Services Leader. “Private companies have conventionally relied on fundamental business strategies to lay the groundwork for success — setting the right people, process, equipment and technology in place.”

According to Business Insights 2013, the top three ways private companies indicated they plan to achieve growth and expansion is through: improved sales and marketing campaigns (44%); improved customer experience and retention (38%); development of new products and services (31%).

The majority of Canadian private business leaders look to the domestic market for growth in the next five years. With organic growth as a priority among companies with under $50 million in revenue, respondents overall are focused on expanding their customer base (45%), improving operational effectiveness (44%) and improving customer experience, retention and loyalty (39%) to drive organic growth over the next three years.

“All of these are reasonable strategies — however — the approaches haven’t changed considerably over the years,” says Ayub. “The question then becomes whether these traditional growth strategies will be enough for Canadian private companies to effectively compete long-term in a progressively competitive business landscape.”

Barriers to future growth
The report found that the primary barriers for growth for the next year include:

  • Economy/lack of activity (38%)
  • Labour shortages/recruitment of skilled staff (28%)
  • Demand for products/services (25%)

These barriers, in addition to increased competition/decreasing market share, are also the same concerns private companies had in the last 12 months. Ayub says, “With surveyors setting an aggressive targeted growth rate, achieving this mainly through local expansion may not be feasible based on the concerns identified in the survey results.”

The Business Insights findings also suggest that the economy is viewed as both a source of optimism (37%) and a concern for business leaders. Ayub explains, “While private business leaders are confident, the past five years have educated the business community that nothing is certain when it comes to the economy and a downshift would always be a major threat to growth. Private company leaders need to be agile and frequently revisit their growth strategies to respond effectively to current market conditions.”

Ayub concludes, “Private companies in Canada have certainly demonstrated their stability throughout the economic downturn and solidified a robust foundation to support their positive outlook. To proceed with the same level of optimism and ensure future profitable growth, private company leaders need to ask whether these tried and true strategies are sufficient over the long-term to remain sustainable in an increasing globally integrated marketplace.”

About Business Insights
The ninth annual Business Insights Survey of Canadian Private Companies examines issues affecting privately held companies including current & future performance and the strategies private companies are adopting to thrive in today’s business landscape. In the summer of 2013, we surveyed over 350 leaders of Canadian privately-held companies from a broad range of industries. Findings from the Business Insights Survey will be divided into issue-specific reports, the first of which will be available October 2013. A copy of the report (when available) and access to early results and charts are available from the media contacts. Data is also available for the 352 respondent companies by revenue, number of employees, age and region.

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About PwC’s Private Company Services (PCS)
More than 65% of PwC Canada's clients are private companies, ranging from high net worth individuals to owner-managed family businesses and large, professionally-managed businesses. PwC's Private Company Services (PCS) group is a dedicated team of business advisors who help private company owners resolve day-to-day business issues and achieve long-term success. PCS offers the perspective of a third party with professional industry knowledge, business consulting, tax and accounting expertise. For more information about PwC's Private Company Services, please visit www.pwc.com/ca/private.

About PwC Canada
PwC Canada helps organizations and individuals create the value they’re looking for. More than 5,700 partners and staff in offices across the country are committed to delivering quality in assurance, tax, consulting and deals services. PwC Canada is a member of the PwC network of firms with more than 180,000 people in 158 countries. Find out more by visiting us at www.pwc.com/ca.

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