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2 0 11 Manulife Financial Small Business Research Report
2 011 Manulife Financial Small Business Research Report 3 Opportunity Knocks 4 Methodology and Executive Summary 5 Professional Support Network 8 Increased Employee Productivity and Focus 11 Top Talent Retention 14 Controlling Costs 17 Access to Capital 20 Growing Revenue 23 Advisory Board About Manulife Financial Manulife Financial is a leading Canadian- worldwide as well as reinsurance solutions, based financial services group operating in 22 specializing in life and property and casualty countries and territories worldwide. For more retrocession. Funds under management by than 120 years, clients worldwide have looked Manulife Financial and its subsidiaries were to Manulife for strong, reliable, trustworthy $478 billion (US$492 billion) as at March 31, and forward-thinking solutions for their most 2011. The Company operates as Manulife significant financial decisions. Our international Financial in Canada and Asia and primarily as network of employees, agents and distribution John Hancock in the United States. Manulife partners offers financial protection and wealth Financial Corporation trades as ‘MFC’ on the management products and services to millions TSX, NYSE and PSE, and under ‘945’ on the of clients around the world. We provide asset SEHK. Manulife Financial can be found on the management services to institutional customers Internet at www.manulife.com.
FOREWORD 3
FOREWoRD
Opportunity
Knocks
I ’m always fascinated when I get a chance
to speak with the small business owners
I encounter in my day-to-day life. Whether it’s
the topics on the minds of small business
owners, and you’ll discover ways to help solve
the puzzles they face each day. We’ve grouped
the firm that keeps my air conditioner running these under six main themes: professional
on those hot summer days or my favourite support network, employee productivity, top
restaurant where my family celebrates special talent retention, controlling costs, access to
occasions, each business owner has his or her capital and growing revenue.
own story to tell. After conducting the research, we asked a Rick Brunet
In our first Manulife Financial survey of small panel of your peers to interpret the results. In this Executive vice-president,
Group
business owners, we wanted to hear those stories. report, you’ll find their ideas and suggestions
Manulife Financial
We asked small business owners to tell us what’s about new ways for you to apply your expertise
on their minds, what their challenges and priorities and to turn small business owners into small
are and how financial planning—and financial business customers.
advisors—can help them achieve their goals. By targeting the six areas of interest, I believe
What we learned is that owners aren’t your skills and advice will be more relevant,
thinking about their overall financial plans. powerful and valued by your clients (small
Instead, they’re focused on paying their bills, business owners). And Manulife Financial is
while wondering how to find good employees, here to help make that possible.
and at the same time trying to win customers, To begin, I invite you to explore the
increase sales and grow profits. information layered between the covers of the
Small business owners might not spend a lot of first edition of our annual Manulife Financial
time thinking about the art of financial planning— Small Business Research Report. Enjoy it, take
they’re too busy running their companies—but some time to dig into the report and come back
they certainly do worry about their financial often for more. I think you’ll discover many
future. So they spend a lot of time on tasks and useful insights on the pages that follow.
goals that you, as an advisor, can help make easier, Be sure to visit smallbizadvisorweek.ca to
more effective and more achievable. explore the other useful tools that have come
In our first annual Manulife Financial Small out of this research to help you better serve
Business Research Report, you will learn about the small business market.
Enjoy.
4 Manulife Financial Small Business Research Report
Executive
Methodology
summary The Manulife Financial Small Business Research Report is based on the results
of an online survey of 1,005 Canadian small business owners and senior
Approximately nine in 10 managers across industry sectors and regions. The research was conducted
companies in Canada are by the Rogers Connect Market Research group of Rogers Publishing Ltd., on
defined as small businesses. behalf of Manulife Financial. The survey was fielded in June 2011. For the
And despite the wide range purpose of this research, “small business” was defined as having between two
of products and services and 100 employees. The margin of error is ±3.1%, 19 times out of 20. The
they offer, they all share following charts provide some of the key demographics of the respondents.
common challenges and Note that some response categories in this report do not add up to 100% due
opportunities. either to the rounding of numbers or questions that allowed respondents to
Small business owners provide multiple responses. Base: All respondents; N =1005
rely heavily on their employ-
ees to remain competitive. Organization size Location
However, to ensure their
businesses are sustainable
British
they need to balance this Columbia
investment in a healthy and 21–50 16% Quebec
employees
productive workforce with 16% 2–10
Alberta 22%
employees 14%
strategies that contain costs 11–20 53%
and grow revenue. employees Ontario
The 2011 Manulife
22% 34%
Financial Small Business
Research Report explores 51–100 employees: 9% Atlantic Canada: 7%
how small business owners Average number: 19.0 Manitoba/Saskatchewan: 7%
are managing their work-
force and day-to-day activi-
ties, while envisioning ways
Position Number of years in business
to grow their companies for
long-term viability.
Less than
10 years
Controlling 23%
ownership
51% 25–49 years
26% 10–24 years
Equal
partnership 32%
21%
50 years +: 7%
Minority ownership: 8%
No answer: 12%
Senior management role
without any ownership: 20% Average: 22.7
Ownership stake (NET): 80%
Professional Support Network 5
SECTION ONE
Professional
Support Network
S mall business is vital to the Canadian
economy, and owners are always looking
to build their companies. With tight resources
consultants (10%), followed by accountants (6%)
and internal company resources (6%).
Within this network, it seems there is a great
and fewer employees, many owners find the opportunity for group benefits and financial advi-
day-to-day issues of running a business a cause sors to position themselves as a key resource for
for concern. The survey data showed that 36% small business owners. But it’s not that straight
of respondents believe not being able to spend forward, as almost six in 10 (59%) of the small busi-
time on big-picture planning is a problem. And ness owners surveyed disagree that they would like
of those, 85% are looking for help. an outside consultant in a quarterback-type role.
So where are owners finding this support? Michael Horne, a partner in the Carleton
The data revealed that owners look to a variety Financial Group in Ottawa, believes this is valu-
of sources for help. Topping the list is outside able insight for benefits advisors. “I think a lot
6 Manulife Financial Small Business Research Report
TOP TIPS of financial advisors hold themselves out as FIGURE 1
that quarterback, so it’s surprising to see that
T ell your clients so many owners are not interested in [having Running a business is a lot
about the contacts advisors in] that role,” he says. more involved than I had
in your network Gad Attias, president of Groupe Censeo Inc. originally anticipated
and offer to set in Laval, Que., is less surprised. “It’s always the
up meetings. president or the owner who quarterbacks these
kinds of organizations because [the companies]
Identify respected Total
are often not big enough to have specialized
accountants and disagree
job titles. The owner usually ends up control-
lawyers in the
ling pretty much all of the decisions,” he says. 31%
industries your small
According to Roger d’Eschambault, president
business owners are Total agree
of dElta Benefits Inc. in Saint-Lambert, Que.,
in and ask to meet
business owners are unaware of all the ways a
67% No
with them. answer
benefits advisor can help. “I think the advisor has
a much bigger role in the overall cost of doing
2%
ffer lunch-and-
O
learns on health business than owners may even recognize,” he
INTENSITY OF VIEW
explains. “I think there is a perceptual issue here;
benefits and pension Strongly Agree: 29%
and retirement perhaps business owners are not placing as much Strongly Disagree: 9%
issues for profession- value as they could be on their financial advisor.” Base: All respondents; N=1005
als in your business
owners’ markets. Selling a Service planning and HR resources—to be ready to
To help change this perception and open the guide the owner through challenging situations.
Identify what door to further opportunity, Joel Rose, principal To help position himself as a knowledge hub
additional value you of usefulideas in Toronto, challenges benefits while building a strong network, Michael Worts-
can provide and advisors to move from a business model built man, associate broker with Creative Planning
communicate this on just selling product to a more holistic service. Financial Group in Toronto, actively cultivates
to your clients. “We often used to only sell product. And while relationships with accountants and lawyers.
we know a lot about that product, we were not “Providing a lunch-and-learn session for a group
evelop service
D saying ‘can I help you with anything else?’ Now of accountants, for example, is a great way to
offerings and make we do,” he explains. Depending on an advisor’s explain to them how group benefits costs can be
sure your clients are area of expertise, this could be HR, business plan- controlled, because that’s generally their mandate
aware of everything ning or risk management help. with their clients,” he explains. A seminar on the
your company This makes sense, especially when you con- Income Tax Act as it relates to health benefits is
provides through sider that 60% of the survey respondents say another good topic, Wortsman says. “Identify the
newsletters, mail they use personal references when looking for things they’re not intimately familiar with, but are
outs, presentation outside consultants, and 49% rely on word part of their business, and share your knowledge.”
add-ons and take- of mouth when searching for help. It appears
home handouts. owners want a reliable contact to put them in Relationship Building
touch with trusted people. Selling on relationship, not price, is certainly
ecome familiar
B
In this environment, Attias sees opportunity. working for benefits advisors such as Sam
with business plan-
“Owners need extra help from someone like Bruno, financial services manager of Simmons,
ning and HR issues
an advisor. The advisor can act as the source Black & Emsland Insurance Services in Kam-
and resources so
of references for financial questions, for human loops, B.C. Many of his small group clients
you can provide
resources questions, for other questions that with five to 10 employees turn to him for far
insight when your
owners may have.” Attias encourages benefits more than simply negotiating a better price
clients need it.
advisors to develop a network of contacts to at renewal time. By broadening his offerings,
support this type of role. He also suggests they he delivers superior service to his clients—and
develop a broad set of tools—such as business secures more business in the process. “Not only
Professional Support Network 7
FIGURE 2
How did you locate the outside consultants or services
that you currently use?
Personal references 60%
Word of mouth 49%
Professional references 46%
Industry association 22%
Industry conferences and events 13%
Internet search 13%
Boards of Trade/Chambers of Commerce 11%
Government agencies 5%
Hard copy directory (e.g., Yellow Pages) 4%
Social media (e.g., LinkedIn; Facebook) 4%
0 10 20 30 40 50 60
Note: Responses less than 2% not shown
Base: All respondents; N=1005
%
do we have their commercial insurance, we such as HR costs and employee productivity.
also get their other [business], such as auto For example, take an owner who may be
plan insurance. They look to us as their main struggling with stressed employees. In addi-
point for many issues,” he explains. tion to recommending that the owner look
For benefits advisors who are unable to into a service such as an employee assistance
provide services such as administration, it program (EAP), a benefits advisor may also
all comes back to having a strong reference suggest experts who offer workplace seminars
ready to offer an owner support in times of focused on relieving stress. “The owner will see
need. Attias embraces this approach, especially the advisor as more important if he or she can
when it comes to guiding clients in key areas provide constructive help,” Attias says.
BENEFITS ADVISOR PROFILE
Teaching clients about your expertise
A few years ago, Joel Rose, principal of usefulideas in Toronto, discovered
something disappointing. “We surveyed our clients and we learned that they
trusted us but didn’t want to do anything besides benefits with us,” he recalls.
He realized it was because clients didn’t know what else Rose’s team could
provide. “So, we added to the back of our benefits presentation all of the Joel Rose
other things that we offered, and we made sure that these were presented Principal
at every renewal and at the end of every one of our initial presentations to usefulideas
clients.” A few years passed before clients started asking about those services,
but once they did, business took off quickly. The lesson for Rose? Recognize
your growth opportunities and assert yourself.
8 Manulife Financial Small Business Research Report
SECTION TWO
Increased Employee
Productivity and Focus
E mployees are the lifeblood of every small
business. When they are productive and
focused they are likely to be contributing even
plan, the number one response was cost (64%).
These are the areas where a benefits advisor
can step in to connect the dots for an owner.
more to the success of the company. In the survey, For example, it appears that offering a health
97% of respondents agreed that satisfied employ- benefits plan or retirement plan might make
ees are more productive. The goal for a benefits employees work harder for a company. The
advisor, then, is to guide and support the owner survey showed that among those respondents
in creating a positive workplace for employees. who offer a health benefits plan, 80% feel tak-
But, even though owners want happy, pro- ing care of employees makes them work harder
ductive employees, cost containment is a reality. for the company, compared to 70% for those
In the survey, 58% of respondents said they who do not offer benefits. A similar trend exists
provide a health benefits plan. Out of those when it comes to retirement plans. Four in five
who do not, 78% support providing a plan, (82%) of those who offer a retirement plan feel
but believe them to be too expensive. Further, employees work harder for the company com-
when asked directly why they did not offer a pared to 74% of those who don’t offer a plan.
Increased Employee Productivity and Focus 9
FIGURE 3 Connecting directly with employees is an TOP TIPS
underutilized tool for demonstrating the con-
Which of the following nection between satisfaction and the benefits
each out directly to
R
employees about benefits
most closely represents plan. After all, says Wortsman, communication
plans at the launch of
your viewpoint? is the crucial part of explaining the value of
a plan, once during the
benefits and, benefits advisors should commu-
year and at renewal time.
nicate directly with employees. “It’s up to us
Taking care of my to offer to do employee presentations at least T alk to business owners
employees makes them
work harder for the company once a year for our clients,” he says. “Every about the prevalence of
time I do one, at the end of the presentation,
76% 80% of the people who are there are excited
stress in the workplace
and its negative impact
about some element that they didn’t even on employees.
know existed before the presentation.” When
Neutral an employer sees this effect on employees, the P romote features in the
17% cost conversation becomes more negotiable, existing plan that can be
Wortsman says. used to help employees
Employees are just looking for the Wortsman also suggests that a similar cre- manage stress. These
best personal deal they can get types of programs are
ative approach can be used for STD, too. “For
6% a company with under 100 lives, a short-term often embedded in
Base: All respondents; N=1005
disability plan can be very expensive. Connect- the benefits plan but
Herb Goedecke, president and CEO of Aero ing a company with a short-term disability aren’t used to their full
Corporate Benefits in Waterloo, Ont., says claims management provider that will handle extent due to lack of
a benefits advisor should first address the things on a case-by-case basis is a great solu- awareness.
idea that plans are too expensive. “There is an tion,” he says. Using an external provider
evelop a stress
D
almost irrational concern that benefits plans are can help to control costs while allowing an
resource kit for own-
too costly. You can demonstrate rather easily employer to formalize STD and be prepared
ers that includes tips
that a plan is affordable, especially if it’s a per- before an employee gets seriously ill.
on recognizing signs of
centage of payroll,” he says. “Business owners According to d’Eschambault, employee
stress and what can help
are surprised they can do it for less than 5%.” meetings are also a good practice at renewal
stressed employees. Be
Where benefits advisors become crucial time. “We’ve been meeting with employers
sure to highlight what
is in helping owners maintain that threshold and employee groups to discuss renewals and
elements of their indi-
through good benefits plan design and cost we have been thanked because they finally
vidual plans can be used
containment. “There is the fear that benefits understand how rates are calculated, even
to cope with stress.
plans are affordable now but that costs will if it sometimes means an increase,” he says.
spiral in the future. We need to continually Wortsman has had a similar experience. “We ollect case studies
C
demonstrate to owners our ability to keep had a renewal meeting with employees for of small businesses
these costs under control,” Goedecke explains. the first time this year and we showed them that have added ben-
Once cost is directly addressed, benefits their health trends and how their premiums efits plans while saving
advisors can move into conversations that have fluctuated,” he says. “Everyone was money and boosting
clarify the indirect impact of benefits plans excited; it was the first time that they had productivity. Refer to
on employee satisfaction and costs. “There been presented with their own group’s health them in meetings with
is often no link between the benefits plan claims data. From there, we discussed what potential clients and
and satisfied employees for the owner,” their employer had done and the work we forward the case stud-
d’Eschambault says, adding that elements have done to control costs.” ies to clients who are
of benefit plans, such as EAPs, short-term A benefits advisor should also meet with his considering increases
disability (STD) and stress management pro- clients—without their employees—more often or cuts to their plans to
grams, are all valuable ways to demonstrate than just at renewal time. Attias sees his clients demonstrate the value
to employers how they can increase employee periodically throughout the year. “Outside of of a benefits plan.
satisfaction and, in turn, boost productivity. the renewal process clients are laid-back and10 Manulife Financial Small Business Research Report
FIGURE 4 is key. While the survey revealed that only 12%
of small business owners and senior managers
How much of a problem is the believe the stress level of their employees is a
stress level of your employees problem, numbers from Statistics Canada tell
for you and your company? another story. A study on work/life conflict sur-
veying more than 31,000 workers found that
Problem more than half felt stressed and one-third felt
12% burned-out or depressed. A separate study by
Statistics Canada found that absenteeism due to
stress has increased by more than 300% in the
Not a past 15 years. The research shows that most small
Neutral
problem
54% 30% companies—whether they offer a plan or not—
need help understanding that stress affects their
employees. Only 14% of companies who offer a
benefits plan are aware that stress is a concern for
their employees. Even fewer (10%) of those who
No answer do not offer a plan are aware of it as a concern.
Base: All respondents; N=1005 3% Wortsman says that a case study or personal
sometimes much more open to listen and explore story about the effects and costs of stress on a
options,” he says. “The client has time to think small business is an effective way to get employ-
about your suggestions, and if he wants to talk ers’ attention. “If you have clients who have
about strategy, ideas or documentation, there is already implemented programs and they’ve
a chance. Then, when we come to renewal time, seen the results either in reduction in claims or
both the advisor and the client are prepared and critical illness claims being paid out, then those
the renewal is a much easier process. It’s definitely are great stories to share with a client who’s
a key point to maintain communication with the going through similar challenges,” he explains.
client and make sure that you give him the tools Attias says that benefits advisors should also use
and information he needs to make a decision.” these discussions to review the plan features that
To further drive home the value of a benefits deal with stress—be it an EAP or other services—
plan, a discussion around employee stress levels to draw attention to the stress level of employees.
BENEFITS ADVISOR PROFILE
Finding individual clients in group
Connecting directly with your client’s plan members is a way to boost the value of
the plan—and an opportunity to grow your own business. Chances are you search
for new group opportunities through your individual clients, but you can also follow
what Sam Bruno, financial services manager of Simmons, Black & Emsland Insurance
Sam Bruno Services in Kamloops, B.C., does and try the reverse. “When a new employee joins
Financial services one of my business owner’s benefit or retirement plans, I ask the company to send
manager the new hire over to me,” he explains. “I personally sign them up to the plan and
Simmons, Black
during that conversation, I talk about that individual’s personal financial plan. I
& Emsland
often end up selling personal life insurance, an RRSP or another product to that
Insurance Services
individual. It ends up being positive for the owner because I’m enrolling the new
employee, and it’s good for the growth of my individual book.”Top Talent Retention 11
SECTION THREE
Top Talent Retention
T o remain competitive, a small business
must hang on to its most talented
employees. A benefits plan is a crucial way to
to attraction and retention. Although, those
that offer benefits or retirement plans seem
to be more aware of their value. Among those
keep great employees from leaving their jobs. respondents that offer a health benefits plan,
In fact, according to the 2011 sanofi-aventis 71% see it as crucial in attracting and retain-
Healthcare Survey, 59% of group health ben- ing top talent, while 31% of those that do not
efits plan members in Canada would rather offer a health benefits plan see it as valuable.
keep their benefits plan than receive $10,000 It’s a similar story for retirement plans. Seven
in cash. When the amount is doubled to in 10 (72%) of those that offer a retirement
$20,000, 48% of those asked would still plan see it as very important and 48% of those
choose their benefits over cash. that do not offer a plan see it as valuable. The
But according to the Manulife Financial Small data appear to reveal a potential opportunity
Business Research Report, only 55% of business for benefits advisors to sell more health and
owners appear to understand the connection retirement plans. The majority of those without12 Manulife Financial Small Business Research Report
TOP TIPS plans are already aware of the benefits, which FIGURE 5
suggests that other factors are the stumbling
evelop strategies
D blocks preventing them from implementing Which of the following
to respond when plans. For those owners not offering plans most closely represents
owners say “The and unaware of their value for attraction and your viewpoint?
plan is too expen- retention, benefits advisors have a strong place
sive.” Think of a to start a conversation.
creative plan design Among those who do not report retaining Competitive health
or new ways of key employees as an issue, the most popular benefits are crucial in
attraction and retention
comparing the cost, tactic reported is to pay them well (34%). A
such as the cost of a benefits package was a distant second (19%).
55%
benefits plan being Of those who view this as an issue, advisors
the equivalent of are a source of support for this issue—31%
the company’s of owners/senior managers report turning to Neutral
next raise. a financial advisor for help. 33%
Benefits advisors can capitalize on this
L ook for opportuni-
trust to show owners what a difference a
ties to create unique Health benefits have
competitive total compensation package could
benefits offerings no real impact in
mean for the success of their organization. attraction and retention
to help your client
stand out in her
This begins with a discussion on the topic 12%
of benefits versus cash. A large number of Base: All respondents; N=1005
industry. Do this
the owners and senior managers who
by learning what
responded to the survey said they would FIGURE 6
competitors are
offer some form of cash compensation—
offering and by
competitive wages (34%), bonuses (11%),
Do you offer or have you
getting to know the
salary increases (5%) or profit sharing (5%) — ever considered offering
needs of the com-
as a way to keep top talent. your employees any of
pany’s employee
base intimately.
“Owners don’t seem to understand the the following?
value that is attached to benefits and how
they can achieve much more by giving ben- Offered Have Considered
reate benchmark-
C
ing reports for cli- efits—which have so much more value to the Profit
Sharing/ 25%
ents regionally and employees on a personal experience—instead
Business 47%
then by industry. of just a raise,” Attias says. After all, a 3% or Equity Plan
4% increase in salary will get taxed, so spend- 20%
sk your client if
A ing the money on a benefits plan puts more Group RRSP
47%
she is considering in the employee’s pocket, he explains. Own-
adding a pension ers appear to believe that cash means more Special 18%
Executive
plan and if not, to employees and is a cheaper option than Plans 41%
what is keeping her a benefits plan. But benefits advisors know
Employee 15%
from starting one. that’s often not the case.
Pension Plan 49%
Horne says one way he tackles the belief
that plans are too expensive is to ask an owner 0 10 20 30 40 50
what his budget is and then build a solution %
Note: Responses less than 2% not shown
accordingly. Bruno gets even more specific Base: All respondents; N=1005
by asking what part of the plan the owner
finds most expensive. “If they say dental, way to show owners that costs can be shared
I work on the dental until I can get it down with employees.
to a reasonable price with deductibles,” he According to d’Eschambault, another
says. Rose agrees that deductibles are a good way to change an owner’s paradigm aboutTop Talent Retention 13
benefits versus cash is to “ask the owner A positive trend, notes d’Eschambault,
what he thinks employees need and help is the move toward insurance companies
him to provide that.” This gives the benefits providing the small group market with
advisor the opportunity to help the owner benchmarking information. “The insurers
create a unique benefits package that is will provide benchmark data for an advisor
almost custom-tailored to the needs of an based on their block of business. They will
employee base. This kind of solution is much drill down to a postal code or industry,” he
more valuable than cash because another says, adding that “there’s probably even
employer will most likely not offer the same more valuable data sitting somewhere on
plan design. It becomes part of an overall an insurer’s computer system that could be
employee retention strategy. useful for everybody to have.”
Knowing what other companies are offer- When it comes to the retirement plan side
ing in their benefits plans is another way of the total compensation package, the sur-
benefits advisors can show owners the value vey data showed that 47% of all respondents
and importance of total compensation. offer some type of retirement savings vehicle
“One thing that you can use to help illus- for employees. The roundtable participants
trate this to a client is a benchmarking tool,” said that in their experience, the majority of
Wortsman says. “They will get a sense of small businesses have a profit-sharing plan.
whether their plan is measuring up against The survey found that 25% have a profit-
their competitors, if it’s worthwhile for sharing plan, 20% offer a group RRSP, and
an employee to stick around, or if they are only 15% offer an employee pension plan.
far behind in some of the coverage.” Horne However, almost half (49%) have considered
says that he benchmarks for his small busi- offering a pension plan, providing another
ness clients both regionally and across their talking point for benefits advisors to bring
own industries. up at their next client meeting.
BENEFITS ADVISOR PROFILE
Learning market influences
on total compensation
For Michael Horne, a partner in the Carleton Financial Group in Ottawa, total
compensation in his region is being driven by the largest employer—the federal
government. “Once companies get to about 40 people, they see their key employees
leaving after three or four years to take government jobs because of the pension,” he Michael
explains. So, Horne is experiencing an uptake in pensions for groups of 20 employees Horne
Partner
and up, as companies come to realize it’s cheaper to put one in place than to lose key
Carleton
personnel and spend valuable resources recruiting and training new talent. “Gone
Financial Group
are the days where people stay around long term. The younger generation is not
afraid to move companies to get to where they want to be, and that is changing
what companies have to do to keep people,” he explains. Research from various
sources supports Horne’s personal experience. According to studies done by Robert
Half International, generation Y (those born between 1980 and 1995) are expected
to switch jobs frequently and are often looking for better benefits and perks.14 Manulife Financial Small Business Research Report
SECTION FOUR
Controlling Costs
F or small businesses, maintaining and
growing a company requires carefully
tracking costs now and figuring out ways to
with a health benefits plan are more likely to
indicate they would look at for cost control
(25%) than those without a plan (17%).
keep expenditures down later. The survey The survey also showed that of the small busi-
revealed that only one-fifth (20%) of owners ness owners who need help in controlling costs,
currently view controlling costs as a problem. most are turning to accountants (16%) or internal
However, all of the respondents cited labour associates (13%) for support. So where do ben-
(27%), then payroll and salaries (22%), as the efits advisors fit into this process? “The cost of
top two most important expenditures to con- labour, payroll and salary means benefits, too,”
sider when controlling costs. Those with health says Attias, but not all employers realize this.
benefits plans are even more motivated to keep Goedecke says he often spends time explaining
labour costs contained, according to the survey. this to clients. “It really is tax-efficient compensa-
Among those with a health benefits plan, 31% tion and not an add-on expense,” he says. For
say that labour is an area that they would look example, explains Goedecke, if an employer is
at to control costs, while only 21% of those that going to spend $1,000 on salary or benefits, it’s
don’t offer a plan would look at this area for the same $1,000 expense to the employer. But
cost control. Payroll is another area that those it’s a big difference to the employee. The $1,000Controlling Costs 15
FIGURE 7 TOP TIPS
With respect to costs, what are the top 3 areas you focus E xplain the concept
on when you are trying to control your expenditures? of total compensa-
Labour/staff/employees 27% tion to your clients so
Payroll/salaries/wages 22% they understand that
Marketing/advertising/branding 12% benefits costs are a part
Travel 11% of overall labour costs.
Inventory 10%
Then outline ways you
Material/material costs 10%
can help control ben-
Company expenses/overhead/fixed costs 9%
Expenses/costs 5% efits costs to keep those
Utilities 4% labour costs low.
Purchasing 4%
Rent/lease 4% learly differentiate
C
Supplies 4% between the cost of
Equipment 4% having a plan and the
Gas/fuel 4%
cost of not having a
Maintenance/repairs 4%
Vehicles 4%
plan, which includes
everything from
Note: Responses less than 4% not shown 0 5 10 15 20 25 30
Base: Total answering; N=903 decreased productivity
%
to absenteeism
in wages is taxable, but $1,000 in benefits is details about which costs keep owners up at and stress to talent
not and has arguably more spending power. night will give a benefits advisor a starting that moves to the
Once owners connect benefits costs to pay- point for reducing those costs. competition.
roll expenses, benefits advisors can open up Many large organizations already capitalize
discussions on strategies to managing expen- on this approach in managing their benefits etwork with fellow
N
ditures. Is the plan being utilized? Could the plans, Horne says. “It’s our job as the advisors benefits advisors with
plan design be changed to maximize health to bring those ideas that have already been experience in large case
outcomes? Should the payment structure studied and understood for years by larger clients to share trends
between the owner or sponsor and employ- companies to these clients with 10 employ- and insights and brain-
ees be altered to promote more responsible ees,” he explains. “It’s about taking things from storm creative solutions
use of the plan? “Controlling costs means the claims-based products and moving them for clients.
helping the owner provide these benefits for to the service-based products, which I think
eview the ways
R
his or her employees in a meaningful and is how we are starting to talk to our clients.”
benefits plan design
economic way,” d’Eschambault says. D’Eschambault also believes benefits advi-
can control costs and
One area where benefits advisors are sors need to provide owners with valuable
be ready to present
strongly positioned to provide insight on con- information. The traditional small business
custom-tailored ideas
trolling costs is around the stress of employees. owner does not have access to the literature
to your clients.
For example, the Canadian Policy Research Net- that benefits advisors get on these issues, he
works estimates that stress-related absences says. “It’s our job to package these data up
cost Canadian employers about $3.5 billion better and show how those broad numbers
each year. According to the Conference Board translate into everyday costs.” Ultimately,
of Canada, 2.6% of payroll is lost annually as explains d’Eschambault, part of being a good
a result of absenteeism (defined as employee benefits advisor is being willing to challenge
absences due to illness, disability or personal or your clients on their paradigms. “We are not
family responsibility). To get more information, yes men. I think it’s up to us to show our cli-
a benefits advisor can ask questions such as ents what steps need to be taken, and why.
“Are you interested in controlling the costs of This is real value to our clients.”
absenteeism? Do you have stress in your work- Not all clients are looking to cut benefits.
place? What effect is it having?” Uncovering D’Eschambault says he is surprised at the16 Manulife Financial Small Business Research Report
FIGURE 8
Where or who would you turn to for help or assistance
to deal with controlling costs?
Accountant/accounting department/accounting firm/CA 16%
Internally/associates within the company/staff/colleagues 13%
Suppliers/dealers/vendors 11%
Managers/office/general/department/operation/regional 7%
Myself 6%
Business partner/partners 4%
Financial institutions/Bank/Bank manager 4%
Senior management/executives/employees 3%
Note: Responses less than 3% not shown
0 5 10 15
Base: Total answering who ranked the issue as a problem; N=250 %
number of smaller clients that have recently Both d’Eschambault and Horne agree that
been requesting that he enhance their plans. “It’s the route around this problem is to develop a
making me think. In the last 25 years we’ve been deep understanding of the employee base, its
saying owners need to increase their deductibles needs and the client’s goals for taking care of the
and lower their co-insurance. Basically, you need employees and controlling costs. For example, the
to strip your benefits plan down. But for some, survey showed that as small companies increase in
it’s the exact opposite. So are we really listening size they are more likely to offer a health or retire-
to our clients?” Horne believes benefits advisors ment plan. Among employers that offer a health
are attempting to be sensitive to their clients’ benefits plan, the average number of employees
concerns by suggesting options for cost savings. is 25 versus 11 employees for those that do not
“When an employer is talking to you about cost offer a health benefits plan. Among those that
and you come in with a proposal to increase offer a retirement plan, the average number of
costs, you put yourself at serious risk,” he says. employees is 32 versus 14 for those who do not.
BENEFITS ADVISOR PROFILE
Taking ideas from big to small
Small organizations typically don’t pay attention to the research showing how
companies can control costs because the data are often based on large organizations.
“They don’t realize that an investment in an EAP program will, over the long term,
reduce health claims. But advisors know,” says Michael Wortsman, associate broker
Michael with Creative Planning Financial Group in Toronto. “Our clients are not too small
Wortsman for an EAP.” Other non-traditional benefits services, such as medical referral and
Associate broker second-opinion services, should also be available to smaller plans, he explains. “We
Creative Planning
know they are going to help the employees’ families feel better, which will make
Financial Group
the owner feel better about the plan he provides.” A benefits advisor can apply the
learning of how larger companies tackle controlling benefits plan costs in a scaled-
down version for small employers.Access to Capital 17
SECTION FIVE
Access to Capital
T he volatility of the national and inter-
national markets will no doubt have an
impact on small business in Canada. Despite that
These results are in line with Horne’s belief
that the small business market in Canada is
very optimistic and healthy right now. Worts-
ever-present reality, small businesses appear to man agrees. “From my perspective, I think the
be optimistic. In fact, about six in 10 (59%) of smaller companies are proving to be healthier
the respondents of the survey say that getting financially than the larger ones that are at that
access to capital is not a problem. And 53% say crossroad about where they need to invest,”
managing cash flow isn’t an issue either. There he says.
are, however, some that do say access to capital While traditionally benefits advisors might
is an issue. Of those, 48% turn to the bank for have had little to offer in helping small busi-
help and 36% turn to an accountant for support nesses access capital, this role is changing.
with cash flow issues. It’s now about benefits advisors positioning18 Manulife Financial Small Business Research Report
TOP TIPS FIGURE 9
each out to smaller
R What areas in your company do you expect to invest in
companies that are over the next 12 months?
growing slowly and
steadily. They may Marketing/advertising/branding 14%
Equipment/equipment upgrades 11%
soon need ben-
Computers/hardware/software 9%
efits or retirement
Training/staff training 8%
programs to attract
Technology 7%
and retain key Real estate/property/office space 7%
employees. Employees/labour/staff 7%
Hiring new staff/qualified staff 5%
E conomic recovery Vehicles 5%
presents an oppor- Machinery 4%
tunity to retain Renovations/upgrades/improvements 4%
employees. Website/internet 4%
Expansion/growth 4%
on’t shy away from
D New/improved products/services 3%
conversations about Inventory/merchandise/materials 3%
access to capital, R&D 3%
growth and manag- Sales 3%
ing cash flow. Ask Additional space 3%
about challenges and NA/none/don’t know 10%
see if clients require
0 3 6 9 12 15
help finding informa- Note: Responses less than 2% not shown %
tion or experts. Base: Total answering; N=892
ork with your
W
clients’ accountants themselves to add value. “Companies that of service from a benefits advisor. For example,
to demonstrate how are in a healthy spot financially might be look- if a company with 50 employees is using the
benefits costs can ing at implementing a benefits program,” same bookkeeper that it was using when it
be controlled to ease Wortsman says. had three employees, the company may not
cash flow issues. Experience has taught Bruno that economic be getting the best advice. “So in a casual
growth leads to a demand for benefits. “In conversation, I suggest the owner get a second
et to know your
G B.C., we had a building boom a few years opinion,” he explains, adding that he will then
clients and their ago. Before the boom, the contractors that provide a few options from his network.
businesses thor- we approached wouldn’t even consider ben- It’s important for Horne to be discussing
oughly. In-depth efits. Once the building boom got going, all of many elements of his clients’ organizations
knowledge can a sudden they wanted benefits to keep their (including access to capital) so he can provide
help you shape a electricians, plumbers and others from moving this type of additional support. D’Eschambault
custom-designed to another company,” he said. also sees the potential in this kind of approach.
benefits or retire- Horne also sees opportunity for his book of “Ideally, clients will say, ‘You know what?
ment solution that business when a client is discussing growing Roger has helped me out a lot, and I’m going
makes you invalu- his or her company. “If I’m in front of a cli- to call him up and ask what he thinks about
able to the business. ent and he is looking to grow the business, I this issue,’” he says. In this way a benefits advi-
have people in my network that I would like to sor becomes the trusted resource for a small
get him in front of. Hopefully, one day those business owner.
people send me clients who are looking for When it comes to cash flow, benefits advisors
benefits,” he says. He believes smaller to mid- can offer more direct suggestions. “Group
size companies will be most open to this kind insurance is a big chunk of the expenses. WeAccess to Capital 19
are able to manage a portion of the cash FIGURE 10
flow by helping the employer control the
increasing costs or giving options to manage
Which of these issues do
it,” Attias says. you feel you need the most
An obvious challenge with having a assistance dealing with?
small business owner who is successfully Ranked 1, 2 or 3
growing is how does a benefits advisor Ranked 1
adapt to this growth? In some cases, says 100 Not Ranked
d’Eschambault, there is nothing a benefits
85%
advisor can do when a company is bought 81%
80
out by a corporation with an existing plan.
However, Attias believes a benefits advisor
in this position can be a key resource for 60
the incoming person or team taking over
40%
a plan. “When a new person comes in we 40
already have full knowledge of the company 26%
and we can make sure that this informa- 20 19%
15%
tion is transferred to those people,” he says,
adding that this supports a smooth transi- 0
tion. “I think it’s also important to keep the Access to Managing
relationship strong with the employer,” he capital cash flow
adds, believing this strong connection, built Base: Those that rated issues as a problem;
Range: N=209; N=182
on long-term, intimate knowledge of the
business, could lead to consulting work for
the benefits advisor. client. “There is no one size fits all. Every
But according to Bruno, the best way to company has different benefits and differ-
service businesses that just grow organically ent pensions, and they require different
is to focus on the distinct needs of each approaches,” he says.
BENEFITS ADVISOR PROFILE
Growing with your clients
Typically, when a small business grows to the several-hundred level, the benefits
advisor servicing the company’s benefits plan can expect to be served with a
transfer letter. “Our advantage is to have such a unique proposal in place that it’s
not easily [shifted] to another advisor,” says Roger d’Eschambault, president of
dElta Benefits Inc. “I want what we do and what we sell to be simply not available Roger
and transportable. So, what does that look like? What can I do to enhance the d’Eschambault
value for the employees in the firm? What are the things that make the employer President
look better to his employees and how can I deliver those to the employer? My dElta Benefits Inc.
point is, advisors must know their small business clients and their needs. It’s about
recognizing that each client’s environment requires a custom-designed solution.”20 Manulife Financial Small Business Research Report
SECTION SIX
Growing Revenue
A s the Canadian economy remains cau-
tiously optimistic in the face of economic
uncertainty in the U.S. and Europe, small busi-
the issue. But growing revenue is a concern
for the remainder of the respondents. In fact,
29% of owners/senior managers surveyed said
ness owners are divided. According to the sur- it is a problem for them and their business. Of
vey, half (49%) of business owners agree that those, an overwhelming majority (92%) feel
they are just holding on economically, while the they need help growing revenue, and they are
rest (50%) disagree. turning to senior partners/external associates,
When it comes to growing revenue, small business consultants, customers and financial
business owners are also evenly divided on institutions for this support.
the topic. About one-third (29%) of those A closer inspection of the data showed
surveyed said growing revenue is not a problem some interesting comparisons. To start, the
for them, while 36% said they are neutral on small businesses that offer either a benefits orGrowing Revenue 21
FIGURE 11 TOP TIPS
4% No answer
What is the 1% $25 million or more
T alk to clients about
total Canadian 1% $20 to $24.9 million business planning and
1% $15 to $19.9 million inquire if they have a
revenue 7% $10 to $14.9 million
Up to
$500,000 written plan. If they
of your 11% $5 to $9.9 million 26% do, ask to see it. If they
organization? Average $3.545 Million don’t, suggest a busi-
$500,000 ness plan consultant
Base: All respondents; N=1005 $2.5 million
to 4.9 million
to $999,999 from your network.
13% $1 to
16%
$2.49 million L earn about your
21% clients’ business and
industry and use that
information to spark
FIGURE 12 FIGURE 13 a conversation about
what clients plan for
Do you have a written Did you have external the future.
annual business plan? assistance in preparing
your business plan? evelop relationships
D
with business plan con-
sultants and business
development experts.
YesYes YesYes Explore challenges and
(definitely)
(definitely)
No No 26%
26% 29%
29% roadblocks that small
40%
40% businesses face and ask
your clients about them.
YesYes No No Offer these contacts
(kind
(kind of) of) 71%
71% as referrals when your
34%
34% clients need help.
Include benefits
and pension costs
YesYes (NET):
(NET): 59% 59% Base:Base:
ThoseThose who have
who have a written
a written annualannual into the business
Base:Base: All respondents;
All respondents; N=1005N=1005 business
business plan; plan;
N=151 N=151
plan, so the owner
can plan accurately
for growth and avoid
retirement plan were more likely to report specialists and business development consul-
unnecessary surprises.
an increase in revenues over the past five tants [to help carry on that conversation], but
years than those who didn’t offer either type we stay involved in the process,” he explains. reate a library of
C
of plan. Next, those companies that offer Rose agrees with staying close to the business planning and
a health benefits plan reported average business planning process so benefits advisors development resources.
revenues of $5 million compared to $1.5 can highlight the importance of competitive When issues come up
million for those that do not offer a plan. compensation packages that include benefits in conversation, offer to
So where is the benefits advisor’s place in and pension plans. “You are fitting yourself send these resources to
growing revenue? According to Horne, it’s into their business model by explaining that the business owner.
related to business development. He actively attracting the best quality employees is their
engages clients in conversations about where most important asset in growing the business
their companies are headed, which provides and making it successful,” he says. These
him with the opportunity to create added conversations can also include suggestions
value. “We have a roster of accountants, HR for controlling labour and employee costs,22 Manulife Financial Small Business Research Report
all of which contribute to the company’s ability FIGURE 14
to grow revenue.
Bruno, who services many very small group Compared to 5 years ago
clients, says he is quite involved in business what is the change in your
development with his customers. “We pretty company revenue?
well know exactly where they are going from
a business perspective. They’re very open to Big
sharing their business plans,” he says. decrease
But it is important to balance the opportunity (-50%)
Big increase
to help clients with the risks of doing so. 11% (+50%)
“You can build a fence around your client by 30%
providing additional services that will help
entrench you in their business, but there’s
Mid
also a point where you’ve crossed over into an (-25%–+25%)
area where you’re not an expert,” Wortsman 57%
says. Rose agrees. “You’re really working on
tricky ground if you step out of your core
competence and tell the customer that you Base: All respondents; N=1005
can do something that you really can’t do,”
Rose says. He believes the best approach is to to help support his client. This has resulted in
meet with clients as a fellow small business deep trust from his clients, which has translated
owner looking to discuss issues related to into referrals. “Not only do I get their business,
running a company, and then see where the but they refer us,” he says. “We have a lot of
dialogue goes. clients in the same industries, and even though
When faced with an issue beyond his scope, they are competing for the same business, they
such as anything falling in the legal or tax [still] recommend our firm to one another for
realm, Bruno accesses his network of experts benefits issues.”
BENEFITS ADVISOR PROFILE
Helping clients build a business plan
The survey revealed that 40% of business owners do not have a formal written
business plan. “For small business owners, a business plan is often in their head.
They are very hands-on and know what they should do this year to reach their
goals. They don’t have the resources, like a VP of finance, to give projections and
Gad Attias keep them tightly on track,” explains Gad Attias, president of Groupe Censeo Inc. in
President Laval, Que. So this presents an opportunity for benefits advisors. “When it comes to
Groupe Censeo Inc. the group pension or benefit portion of business planning, these costs, specifically
group insurance costs, are something that eats up a big portion of expenses every
year. The advisor can help project future costs of this expense and show how it will
impact cash flow.” Attias feels helping a business owner identify where cash will be
needed so he can plan more thoroughly is the most effective indirect way to help
a client grow revenue.2 011
Manulife Financial The 2011 Manulife
Financial Small Business
Small Business Research Report relied
on the advisory board
Research Report to help shape the survey
theme and interpret the
results. We thank them
for investing their time,
breadth of knowledge
and expertise in this
Advisory Board
inaugural look at the
small business market
in Canada.
Gad Attias Sam Bruno Joël Drolet
President Financial services manager General manager
Groupe Censeo Inc. Simmons, Black & Emsland Goguen Champlain
Insurance Services Financial Services Inc.
Roger Herb Goedecke Michael Horne
d’Eschambault President and CEO Partner
President Aero Corporate Benefits Carleton Financial Group
dElta Benefits Inc.
Jay Quinn Joel Rose Michael Wortsman
President Principal Associate broker
Lane Quinn Benefit usefulideas Creative Planning
Consultants Ltd. Financial GroupLearn about all the innovative ways
Manulife Financial supports advisors
and their small business clients.
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