Montréal, Québec, June 16, 2009 – Clients of the Business Development Bank of Canada (BDC) achieve higher revenue growth, higher employment growth and survive longer than non-BDC clients. These are some of the key findings of a Statistics Canada economic impact study. The study compared data from BDC clients to data from similar businesses in the same industries, using study track groups, or cohorts, of BDC clients by the year they began doing business with the bank between 2001 and 2005.
For the first time, a study objectively measures the impact that BDC services has on the development of small and medium-sized businesses. Among the findings, Statistics Canada concluded that BDC financing clients had up to 26.8% higher revenues for an individual cohort in a given year compared to non-BDC clients between 2001 and 2005. Clients using both financing and consulting services fared even better, with up to 59.3% higher revenues than non-clients in those years.
"This analysis, while done before the recession, demonstrates the important role BDC plays for entrepreneurs who are managing companies in a fast-changing economy," said Jérôme Nycz, Vice President, Strategy and Planning at BDC. "It points to the value BDC creates for entrepreneurs. Even in the first part of this decade, headwinds included globalized supply chains, heightened foreign competition and a volatile Canadian dollar."
The Statistics Canada study, commissioned by BDC in 2008, looked at 12,000 BDC financing clients and 2,500 consulting clients and matched their performance to that of similar non-clients drawn from the agency's database and Canada Revenue agency tax records. The typical small or medium-sized business had annual revenues of around $2 million and fewer than 20 employees. Client confidentiality was maintained at all times. No client identifiers were provided to BDC by Statistics Canada and vice versa.
Revenue growth
The analysis found that revenues increase in the years following the initial year that BDC clients receive financing, as effects are cumulative. For example, companies that began using financing services in 2002 experienced additional revenue growth of 5.1% in the first year, 13.0% in the second year, 21.2% in the third year and 26.8% in the fourth year, compared to non-client businesses analyzed by Statistics Canada. Positive growth was observed for all cohorts.
Using the Bank's financing and consulting services together further helps to bolster revenues. BDC clients that used both services not only outperform non-BDC clients on the revenue growth front, but they also outperform other BDC clients that use only one of the Bank's services. For example, the 2001 cohort of BDC clients that used both financing and consulting services had 59.3% higher revenue growth in their fifth year as BDC clients than non-BDC clients, while BDC clients that used only financing or only consulting services had 21.0% and 18.9% higher revenues, respectively, than non-BDC clients.
Employment growth
BDC clients had between 4.0% and 11.1% higher employment growth across all cohorts in each year than non-BDC clients with the exception of the 2001 cohort, where there was no difference in employment growth between BDC and non-BDC clients.
Survival rates
The data analysis also showed that BDC clients have significantly higher survival rates than non-BDC clients. For all cohorts, the higher survival rate of clients compared to non-BDC clients generally increased with time. In other words, an increasing number of companies that use BDC services remained in business as they matured.
Operating profits
The analysis found that companies using BDC financing services had lower profit growth. It is important to note that profit margins were low for both BDC and non-BDC clients in the years analyzed. Lower profit growth among BDC clients may actually indicate positive developments for these businesses, as entrepreneurs may be directing more cash to long-term development because they perceive BDC to be a committed partner and patient lender.
"Considering that BDC is a key player in the federal government's response to the recession and credit crunch, the results of this study is hopeful news for entrepreneurs looking for support in riding out the economic storm," said Jérôme Nycz. "We will conduct similar analyses in the future to ensure that BDC's suite of services continues to contribute to the positive performance of Canadian businesses."
BDC is Canada's business development bank. From 100 offices across the country, BDC promotes entrepreneurship by providing highly tailored financing, venture capital and consulting services to entrepreneurs.
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