Every Friday at 1pm EDT, L3 convenes an open discussion to source insights and ideas around social acquisitions and conversions of small businesses in Canada. This is a recap of last week's Huddle (March 27).
Should we be doing business as usual?
One of the first things brought up in the Huddle was the strange nature of public policy measures being enacted to support small business. “It felt like the public policy playbook that was kind of being dusted off was very much a financial crisis one,” one Huddler said. And yet as we know, COVID-19 and its impact is not a financial crisis – it’s an economic one. Food for thought.
One Huddler said that Canada and Canadian businesses should avoid just trying to rush the economy back to the same level of “energy intensity and unsustainable consumption that we were mired in before this crisis.” We should also be examining which businesses have been considered “essential” businesses and which are not. These has been “a forced choice around prioritising what types of economic activity are valuable.” The decisions on which businesses are essential are being made based on values and personal priorities, and not on more scientific or deliberate, thought-out system-based approaches.
Lived realities of business owners
We noticed that when dealing with supporting businesses through this time, the challenge is that every small business is different, especially when it comes to their cash flow. Therefore, the government seeking to offer loans to weather the storm will not always be the right solution for a lot of businesses, because servicing that debt even in a normal state of operations, let alone in an economy in crisis, is just not feasible.
One Huddler noted that as business owners are trying to shift to operate online and investing in new technologies, they are of course under severe financial strain. They are trying to move quickly but almost entirely in the dark, since they still have no idea how long the social distancing measures will last or what their long-term effects will be. This all while their cash flow and ability to pay mortgages and bills Is disappearing. And let’s not begin to mention childcare and other personal challenges, disrupters, and stressors that are affecting our business owners. It’s a wild time.
But what about this concept of Social Acquisitions for Business Recovery? What might they look like?
Is it equity crowdfunding? Is it driving a campaign for a social impact bond? Is it a bit of both?
One of the first questions raised was ‘What exactly is being acquired?’ What is being purchased, what is being owned? Is it just the equity? Sector to sector, business to business, what that equity is made up of can vary dramatically. Sometimes what’s being bought is high intensity capital, but sometimes all that’s really being bought is the book of business: supply chains, processes, existing customer bases, and such. Some businesses might not need much external capital, some might need quite a lot.
Several Huddlers stressed the importance of examining the motivation behind an owner seeking a social acquisition for their business. We can’t be saddling well-meaning social entrepreneurs and financiers with bad investments.
One Huddler flagged the reality what the COVID19 crisis has laid bare when it comes to how we support and lend to small businesses in Canada, and the truly precarious nature of the systems they operate in, Large corporations will weather these challenge, and be able to draw on resources much differently than our smaller businesses can, and that’s something we should take action on.
Many small businesses behave in socially-driven ways already. Pursuing a social acquisition should very consciously acknowledge and absorb the social, environmental, and cultural impact already generated by the existing business, and be able to then amplify these in any new form that it takes.
A final flag us Huddlers found was that a really good transition often takes years, and if we’re talking about transitions that need to happen in months, there’s plenty of difficulty and risk ahead of us that will need be properly identified and managed.
Join this week's huddle!
Join the Zoom conversation at 1pm EDT this Friday April 3rd: https://zoom.us/j/574885913.
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About Legacy Leadership Lab (L3)
L3 is an 18-month initiative by the Waterloo Institute for Social Innovation and Resilience, funded by the Government of Canada’s Investment Readiness program. We are leading five Workshops from coast to coast to help build expert-driven solutions for Canada’s transitioning small business community. During these Workshops, the we will develop market interventions and prototypes that allow conventional and social finance players, business service providers, and community leaders to facilitate social purpose conversions of existing businesses in their own towns.
About Waterloo Institute for Social Innovation and Resilience (WISIR)
WISIR is a research institute at the University of Waterloo’s School of Environment, Enterprise and Development committed to generating trans- and inter-disciplinary knowledge about social innovations and the social innovation process (the dynamics of learning, adaptation and resilience). Our approach is to pursue collaborative research and projects that bridge University of Waterloo departments, involve researchers from around the world, and engage those beyond academia. We seek to mobilize this knowledge through a range of new curriculum offerings and training opportunities - both within and outside of a university setting.