Strategic and streamlined: provincial governments in Canada need to encourage small business growth. Here's how two ministries are managing the challenge.

The vast majority of businesses in Canada are small to medium-sized enterprises (SMEs). In its federal budget submissions, CMA Canada has regularly championed the cause of support for SMEs. At the provincial level, however, it is currently individual CMAs who are working to create effective change for SMEs in B.C. and Ontario.

Fighting the bureaucracy sandcastle

Rick Thorpe, CMA, is B.C.'s Minister of Small Business and Revenue and Minister Responsible for Regulatory Reform, positions he was appointed to on June 16, 2005. He entered politics in 1995, after retiring from a very successful, 22-year career at Labatt's, and five years with Vincor. He previously served as Minister of Provincial Revenue and Minister of Competition, Science and Enterprise.

He was first elected in 1996 to represent the riding of Okanagan-Penticton and was re-elected in 2001 and 2005 to represent Okanagan-Westside.

"In 2001, I was named Minister of Competition, Science and Enterprise," Thorpe notes. "At that time, the Premier asked that I reduce regulatory red tape for businesses working with the government by 33%, as part of the government's continued effort to make doing business with the B.C. government easier. I was actually able to reduce red tape by 37% over a period of three years, and right now we've got a reduction of around 41.5%."

As Minister Thorpe has said on a number of occasions, sound financial management is essential for government if it wishes to create prosperity. One way of managing finances is to streamline processes, making it easier to function. The B.C. government has created a platform through which they hope to make SMEs more effective and tied up in less red tape.

"For track one of this plan, we're committed to no regulatory increases," notes Thorpe. "So, if you want to add a regulation, you have to cut somewhere else. For track two of this plan, we want to save B.C.ers time. Saving them time will save us time. We've set up a permanent roundtable on small business, and have also been given the mandate to review the Provincial Sales Tax Act.

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"Under the auspicies of these two initiatives, I've visited 18 communities with the roundtable and 20 for the sales tax review," continues Thorpe. "From these meetings we've gathered a lot of useful feedback. Businesses are looking for competitive taxation, regulatory reform, and maintaining and developing skilled workers for small business in the province."

Thus far, Thorpe has made inroads in several of these areas, but he sees room for greater goals. "We're trying hard to get the federal government to work with B.C. on regulatory reform, and maybe Flaherty's Advantage Canada will be a good place to start," he notes. "In working with municipal governments, we are making more headway. I recently went to the Union of B.C. Municipalities meeting and announced that there is going to be a single business licence in the province by December 31, 2008."

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In the interest of developing small business leaders for the future, the government has also dedicated $2 million to create Junior Achievement programs in every school district by 2010 to encourage entrepreneurship among the young.

"Bureaucracy can be like building a sandcastle at the beach," says Thorpe. "If you don't keep working on it, the tide's going to take it away. Bureaucracy is like that. If you let people simply introduce regulatory reforms without tough questions, the red tape will build up and build up. In our small business report, we have a checklist that has to be done to introduce a regulation. It creates a small business lens for the process, and that's important for the province as a whole."

The work that Thorpe has done has created a lot of interest among Canada's other provincial governments, several of which have come to consult with him on how to introduce similar programs. "For me, it's an exciting project," says Thorpe. "It's not about headlines or being on national TV, it's about working with business professionals to get rid of bureacracy."

Improving communications

Harinder Takhar, CMA, FCMA, Ontario's Minister for Small Business, is one of the individuals who has met with Thorpe to understand precisely how his initiatives have worked. Ontario's small business ministry was only created nine months ago, so the support gave him a useful perspective on how to further develop his initiatives.

"B.C. has done some very good work in this area," says Takhar. "I was quite impressed. They've got very specific targets, they measure them monthly, and they drive them through incentives. And, most importantly, they have a small business lens in cabinet--whenever any decision is made, they ask the question, 'how is this going to affect small business?'"

Takhar notes that the definition of an SME may be slightly different for the two provinces. In Ontario, it is defined as any company with up to 500 employees--about 99% of companies in Ontario, 50% of the province's employment, and 70% of new jobs. In other words, a sizeable portfolio of customers.

"We started a red tape initiative of sorts in 2003, with this new government," notes Takhar. "With this new ministry, we're trying to accomplish a number of goals."

Like Thorpe, Takhar's main mission is to make doing business easier for businesses. He has also consulted with business in a number of communities and has decided that the first step in this journey should be to reduce the paper burden for SMEs.

"There are roughly 5,000 forms used by different ministries for SMEs," explains Takhar. "Trying to cut this number down is a challenge, so we've decided to concentrate on seven ministries most involved with SMEs, and in these reduce forms by 30%. We're working towards that target quite effectively at the moment. We are also trying to make it easier to fill out forms by putting many of them online so that information can be cross-referenced."

The ministry also wants to make sure that industries understand how legislation affects them.

"Right now, we have a pilot project in which the body shop industry has all the rules and regulations that affect it put online for them--they are all in one place online, so that they understand what affects them and how. We are now extending this to the plastics industry. With these central repositories, we should be able to catch duplicate or inconsistent regulations and remedy them proactively."

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Drafts of new rules and regulations will also be placed on the Internet so that small businesses can offer feedback.

"We've also been told, through discussions with SMEs, that it's very hard to find out what government is doing for SMEs," notes Takhar. "Posting draft regulations remedies that to a certain extent, but we have also introduced a new website, www.sbe.gov.on.ca, that explains how to start and grow a business, and how government can help (what incentives are available in a variety of categories, such as training, export, R & D, etc.). We've also released a pocketbook for SMEs, about the advantage of doing business in Ontario."

Discussions with small business has also raised issues about doing business with the Ontario government. For instance, businesses have to hold a certain amount of insurance to do business with the Ontario government. Takhar is currently reviewing this to see where that insurance requirement is too cumbersome and where it makes sense as-is.

Ontario is also keen to encourage entrepreneurship. To that end, it's currently working on a pilot project that would send 10-15 university students to work with multinational firms overseas for a summer.

"The government will pay certain expenses, and the students will get a sense of the opportunities available around the world," says Takhar. "When they return, they will be asked to write a paper about what opportunities they see for Ontario business in the country they worked in. There's a lot of interest from business already, and we look forward to launching the new program soon."

These two provincial ministries are taking somewhat different approaches to the challenge of supporting SME growth and maintenance. However, by sharing their ideas and adding an SME lens to the way their governments function, they are encouraging positive strategic change.

Robert Colman is editor of CMA Management.