Evidence of meeting #32 for Finance in the 39th Parliament, 2nd session. (The original version is on Parliament’s site, as are the minutes.) The winning word was risk.
A recording is available from Parliament.
President and Chief Executive Officer, Business Development Bank of Canada
The question is: what kind of business are you in? What type...
President and Chief Executive Officer, Business Development Bank of Canada
Do you need to redefine your market? Are you able to innovate your product so that your profit margin is greater? Can you find niche markets where your customers would be less sensitive to price? That is the process of reflection we would go through, company by company. There is no simple answer.
Conservative
Bradley Trost Conservative Saskatoon—Humboldt, SK
Thank you, Mr. Chair.
I'm not a regular member of the committee, but I'm substituting today, and I have seen BDC when I was filling in at the international trade committee or previously at the industry committee. I have a couple of small questions, maybe not too important, but a couple of small questions of interest to me.
One of our notes talks about BDC having more than 27,000 Canadian entrepreneurs as clients, 6,000 of whom are exporters, accounting for nearly 40% of BDC's portfolio. I guess what I'm curious about is that BDC is one entity working with the Government of Canada. We have the Department of Foreign Affairs and other entities to help with export development. My question is, how integrated are the government's various services between DFAIT, BDC, and so forth, to help Canadian exporters, particularly small and medium-sized enterprises? Are the various services integrated? If they are, how effective is the work? If they aren't, why aren't they, and would it be effective if we had a more integrated approach between various government departments and crown corporations?
Does the question make sense?
President and Chief Executive Officer, Business Development Bank of Canada
There is a very serious effort for all groups to work together to try to have as seamless a response as possible. In the case you've just mentioned, clearly EDC has a role to play; when one talks about export, that's their role by definition. Clearly we have an interest in ensuring that our companies become global, so we will refer the various transactions in foreign markets to EDC, as an example.
There is a meeting of the minds that it would be best for everyone if we worked together. Those are large organizations, so there is always room for improvement, but we've met the management team at DFAIT and we're meeting the management team at EDC; we have solid dialogue with them, so given the size of all organizations, it's working.
Conservative
Bradley Trost Conservative Saskatoon—Humboldt, SK
Your organization may not be the one to take the lead on it, but is there any organization taking the lead on getting a more integrated approach?
The idea of Service Canada was introduced to try to bring everything from employment insurance to taxes and so forth into one centre. That's a really good idea for dealing with constituency services. Is anyone coming up with that sort of idea, the equivalent of Service Canada, for exporting? Let's say I wanted to export or import or whatever--import oranges and trade back wheat, or something like that. Is there a place I could get financing and foreign affairs information, a place I could get anyone? Is there anyone taking the lead to put that together? If not, which of the organizations do you think would be best suited to do that?
President and Chief Executive Officer, Business Development Bank of Canada
I wish I could answer that question better, and I would need to really check that I have the right answer for you, but we would not be the place to come if you wanted to check on where to sell a particular product. That's not our expertise.
Conservative
President and Chief Executive Officer, Business Development Bank of Canada
We definitely are one of the players in helping companies look at the global market. Obviously, if Canadian businesses are to succeed, they have to think globally, so we're certainly encouraging them to do that.
On an export transaction, clearly EDC is better suited than we are, and we work well. If you go to our website, you'll be referred to an EDC website--and vice versa, and so on. There is an effort at passing the baton to the other institution.
Conservative
Bradley Trost Conservative Saskatoon—Humboldt, SK
That's encouraging. I'd encourage you to keep at it.
I have just one last little curiosity. On projected statements of income and comprehensive income, there is one thing I have noticed. Venture capital has losses projected for two years, which I can understand. I'm just a little curious here. On net loss from consulting, it's projected that consulting will always continue to have a net loss. Again, I'm probably not as familiar as I should be with everything at BDC. Can you explain the rationale for a continuing loss, instead of, say, a break-even aspect to that?
President and Chief Executive Officer, Business Development Bank of Canada
We've had numerous internal debates on that issue.
Right now we're providing an increasing number of mandates to Canadian entrepreneurs. Every year we're going to go to 2,500 mandates and 2,600 mandates and so on, which means that we're helping more and more entrepreneurs to deal with their challenges.
Remember that we deal with very small firms. Of our clients, 76% have fewer than 20 employees and 96% have fewer than 100. We are talking about small firms, and they're very price-sensitive when it comes to laying out dollars for consulting.
Our belief is that we're providing an awful lot of good to those Canadian entrepreneurs, and whenever we try to increase the price, there seems to be a bit of a threshold at which people back off and say they will wait. In the greater scheme of things, given the fact that we are profitable as a development bank, we feel we're better off helping more entrepreneurs--even if we lose $4 million--than not. We could try to increase the price and break even, but we are somewhat convinced that the way to get there.... We'd probably end up doing fewer mandates.
The positive side effect that we can't measure, but which we know is there, is that most of these clients in consulting are BDC financing clients. You don't have to be a BDC financing client--
Conservative
Conservative
Liberal
Massimo Pacetti Liberal Saint-Léonard—Saint-Michel, QC
Thank you, Mr. Chairman.
Just to continue on that train of thought, actually, I have a BDC in my riding and I know BDC a little bit through my years as an accountant. One aspect I would say we could criticize BDC for is its consulting. A lot of comments I get from some of the clients of the BDC is that the consultants are not providing them with any of the business, so I'm not sure.... It's a limited number of people I've spoken to, but that's one of the aspects where I could be critical of the BDC, the consulting part, from my own personal point of view.
Also, the fact that it does generate loss, maybe you can look at that, but I'm not sure how you evaluate whether it is something where the clients are satisfied or how you determine its return.
President and Chief Executive Officer, Business Development Bank of Canada
We use an outside firm to do an external survey of client satisfaction, and the results are quite positive overall. As I said earlier, we have 400 outside consultants, and inasmuch as I'd love to say all 400 are great, there might be the odd one who's not performing as well as we would like. Overall, the client satisfaction level on consulting is quite high.
Liberal
Massimo Pacetti Liberal Saint-Léonard—Saint-Michel, QC
My question was how you determine your different sectors and break out the revenues. On the consulting side, do you force your clients to use the consulting service, or is it recommended?
President and Chief Executive Officer, Business Development Bank of Canada
We never force anyone to use the services. We will recommend, in some cases, that they look at it, but it's clearly the entrepreneurs' decision whether or not they use consultants.
President and Chief Executive Officer, Business Development Bank of Canada
No, not at all.
Liberal
Massimo Pacetti Liberal Saint-Léonard—Saint-Michel, QC
Just to go back, you do provide financing, from what I understand, to small and medium-sized enterprises, but now with this new venture capital fund that you'll have, you're going to be looking at lending money to companies over $30 million. I think that's no longer small and medium-sized and 20 employees or less, when somebody's doing $30 million in business.
President and Chief Executive Officer, Business Development Bank of Canada
Let me try to put that back in perspective.
