The impact of COVID on entrepreneurship in Alberta – Blog #32

21 September  2022

The impact of COVID on entrepreneurship in Alberta – Blog #32

COVID has affected different sectors of the economy in different ways, and this is also true of entrepreneurship. A recent report by the Global Entrepreneurship Monitor (GEM) illustrates how the pandemic has affected different types of entrepreneurs in Alberta. GEM is the largest study of entrepreneurship in the world and routinely covers 50-70 countries.

In 2021 the Alberta economy grew by 5.8% after a decline of 7.9% in 2020. The report illustrates how the pandemic affected different stages of entrepreneurship as they recovered from the big decline in 2020.   The different stages of entrepreneurship described in the report are nascent entrepreneurs (those planning to start a new business), baby businesses (those 3-42 months old) and established business (more than 42 months old). The report also shows how entrepreneurs of different ages and education levels were affected differently.

New opportunities.

There was a significant difference in how the different stages of entrepreneurs identified new opportunities to grow their businesses. 53% of nascent entrepreneurs agreed that the pandemic had provided new opportunities, contrasted with 66% of baby businesses but only 33% of established businesses. Overall, about 60% of entrepreneurs agreed that the pandemic had provided new opportunities for them. This finding is consistent with research showing how adversity often creates opportunity for those looking for it. It is surprising that only 33% of established businesses saw opportunity arising from the pandemic. Perhaps this is because they already had a well-honed business approach that they were trying to maintain, and the pandemic disrupted that.

Government response

The different stages of entrepreneurs also responded differently when asked how satisfied they were with government supports. 51% of nascent entrepreneurs were satisfied with the response, compared with 70% or baby businesses but only 44% for established businesses.  Overall about 60% of entrepreneurs were satisfied with government supports. It is likely that the explanation for these differences lies partly in their eligibility for funding. Startups have no revenue so in many cases were not eligible for funding. Established business could have been disproportionately affected by lock downs and pandemic restrictions and that may explain their low satisfaction levels. Baby businesses in some sense had the best of both worlds – they had a revenue stream so could attract funding, but did not have the fixed costs of the established businesses.

Effect on household income by age, gender and education.

Alberta entrepreneurs experienced a much steeper decline in household income than those in BC or Saskatchewan. 41% saw a decline in household income in Alberta, compared with 32% in BC and 30% in Saskatchewan.

Male entrepreneurs had a slightly higher decrease in income than female entrepreneurs (42% compared with40%).

The age of the entrepreneur had a very significant effect on their decline in income. The youngest entrepreneurs (aged 18-24) saw the biggest decline in household income (52%), and the oldest entrepreneurs in the study (aged 65-74) had the smallest decline (22%). In between, the 56-54 age group had the largest decrease in household income (47%). The 25-34 age group saw the biggest increase in household income in 2021.

Education level also affected income in 2021. The highest reported percentile decrease in household income was with those with some high school education (56%), followed by those with no/less than high school (45%) some college/university (45%), and completed high school (44%). The lowest decrease was in the graduate group, with a Masters or PhD (30%).

Growth expectations.

Alberta entrepreneurs were optimistic about future growth prospects, despite the difficulties of the pandemic.  The most optimistic group were the Established Businesses, where 36% expected higher growth and only 25% expected lower growth.  The least optimistic were the Baby Businesses, where 33% expected higher growth but 29% expected lower growth.  Overall these numbers seem to reflect confidence in the future economy in Alberta.

Future employment

Entrepreneurs were asked how many people they expected to employ in 5 years’ time. 11% of startups expect to employ 20+ people in the next five years. 38% of Baby Businesses and 25% of Established businesses also expect to employ 20+ people in the next 5 years. The results for Baby Businesses and Established Businesses were the highest among the four western provinces, and higher than Canada as whole. These metrics also show a considerable amount of optimism about future growth prospects.

Conclusion.

These results are a reminder to those providing services to entrepreneurs that not all entrepreneurs are the same, and that segmenting the group into categories may be a way to provide them with better services in the future.

The full report can be found  https://thecis.ca/wpdm-package/gem-impact-of-covid-on-entrepreneurship-in-alberta/

Peter Josty