Industry and Technology Committee on Oct. 6th, 2025

[Karim Bardeesy, Liberal, Taiaiako'n—Parkdale—High Park, ON]

Thank you.

I have a couple of questions for Mr. Fast and then a couple of questions for Monsieur Duhamel.

Mr. Fast, in the housing sector, there are some long-standing productivity metrics that haven't moved as much, but you're in the manufacturing part of the housing sector, and you've obviously moved up the value chain. Can you speak, from a firm perspective, on what you've done that maybe some of your competitors have not done?

[Neil Fast]

Certainly. I have been involved in the construction industry since I was 18 and a half years old, and we have been concerned about productivity and labour since then.

Particularly, we operate, as you said, at the high end of the market, but we still see and are held captive by the productivity challenges in new home construction. We are involved in houses that can take three and four years to build from the time they break ground, much of that due to local permitting and labour restrictions, and we build sports arenas in faster times than some of these homes.

We operate on a custom perspective. Let me step back. If you were in the COVID market, you saw 2022 and 2023 as some of your largest years ever, as you were able to stuff the supply chain full of inventory that you pushed off the shelf. As a custom manufacturer, we are tied in tightly with our home builders and architects, and we make nothing until the home is already well under construction, and that certainly helps our ability to not get caught in the whiplash of new residential construction.

I'm not sure if I answered your question in the way you were looking for.

[Karim Bardeesy, Liberal, Taiaiako'n—Parkdale—High Park, ON]

That's very helpful, thank you.

You also mentioned capital raising and having access to financing vehicles. The Competition Bureau just started a study on small and medium enterprise access to lending from the big financial institutions. Without divulging any corporate secrets, can you just tell us how you've traditionally financed and the role of banks, in particular, in that?

[Neil Fast]

Yes. We operate at a very high degree of, frankly, corporate equity and reinvestment in the business. We have almost no unsecured financing in the business and very little secured financing. We reinvest with the profits.

[Karim Bardeesy, Liberal, Taiaiako'n—Parkdale—High Park, ON]

That's one of the benefits of a family enterprise in the long-term horizon, I gather.

Thank you.

Mr. Duhamel, you shared some very interesting and informative statistics about businesses and a wave of upcoming retirements.

The former government implemented a public policy to encourage employee ownership. Are you satisfied with that policy? Is employee ownership a solution for dealing with the wave of upcoming retirements that you mentioned?

[Marc Duhamel]

Thank you for your question.

Transferring a business to employees is one of the three main types of business transfer. It is the least popular among transferors. Only about 15% of them plan to transfer their business to employees. In Canada, the most popular type of transfer by far is the transfer to external owners. Since 2018, this type of transfer has accounted for 60% of transfer intentions, placing it far ahead of the second most popular type of transfer, the transfer of the business to family members, which accounts for approximately 25% of transfer intentions.

Although there are programs aimed at transferring businesses to employees and this type of transfer can improve a business's productivity and financial performance, it remains a minor component in the overall business transfer picture because approximately 85% of business transfers involve other types of transfers.

[Karim Bardeesy, Liberal, Taiaiako'n—Parkdale—High Park, ON]

Do public policies increase transfers to external parties? Should one of the goals of public policy be to reduce the sales rate for such individuals?

[Marc Duhamel]

From an economic perspective, the most important thing a public policy can do is to ensure the transfer of businesses. The main reason is that two major factors are often overlooked when a business is transferred. First, the transfer prevents the dissolution of the business and thus prevents the loss of intangible capital, which is becoming an increasingly important contributor to business productivity. Second, the transfer maintains the intensity of the competition in local markets, particularly in more remote markets. It is therefore important to ensure that transfers take place.

What is the ideal method of transfer? The transferor and the buyer are in the best position to determine the best way to transfer the business, whether it be to a family member, an employee or someone outside the business.

[The Chair, Liberal, Ben Carr]

Thank you very much, Mr. Bardeesy.

Mr. Ste‑Marie, you have six minutes.

[Gabriel Ste-Marie, Bloc, Joliette—Manawan, QC]

I welcome Mr. Fast and Mr. Duhamel and thank them for being here.

My questions are for Mr. Duhamel.

First, I would like to give you the time to finish your presentation.

[Marc Duhamel]

Thank you very much.

I would just like to briefly add a few things.

First, Canada is facing a challenge in terms of business succession. Second, the approach that is often taken to address this challenge is akin to trying to fill a pool with a bigger hose in that we are sending more new, fledging entrepreneurs into the pool. The problem is that we are losing a lot of these entrepreneurs. The wave of transfers is threatening the survival of existing SMEs, which form the foundation of a vibrant, productive and prosperous entrepreneurial ecosystem.

The best way to ensure the survival of these businesses is to make sure that they get transferred. The problem that we are seeing in Quebec is that most transferors and buyers go about the transfer the wrong way and do not understand the process properly. Ultimately, we end up with a relatively high transfer failure rate. As a result, SME owners may hastily decide to dissolve their business.

From what we are seeing in Quebec, business transfer is a unique market because of its lack of transparency. The information exchanged between buyers and sellers is sensitive business information. Transferors tend to not want to reveal too much for fear of negatively affecting the value of their business.

Nevertheless, more data is needed so that all transferors, buyers and intermediaries working to promote or carry out a business transfer are aware of the extent of the problem.

In Quebec, this approach to data production, which enables transferors, buyers and all stakeholders in the ecosystem to become aware of the importance of this phenomenon in their area, was fundamental to mobilizing all stakeholders, whether it be the Business Development Bank of Canada, the Fonds de solidarité FTQ, Repreneuriat Québec or the Quebec ministry of economy, innovation and energy, and encouraging them to develop strategies to better prepare transferors and buyers and to find and train the next generation of entrepreneurs so that they are able to take over a business within a reasonable period of time.

[Gabriel Ste-Marie, Bloc, Joliette—Manawan, QC]

In your presentation, you mentioned the difference in productivity between a business that is taken over and a new start-up.

Could you elaborate on that?

[Marc Duhamel]

It is important to understand that we want new start-ups in Quebec, but that, in terms of productivity, a business transfer has three big advantages over starting a new business. Transferred businesses are the gems of Quebec's entrepreneurial legacy. I have no reason to believe that things are any different outside of Quebec. Transferred businesses generate an average revenue of $4.6 million and employ about 15 people. What is more, the revenue level of transferred businesses is $300,000 per employee. It is clear that these are not small businesses. Yes, many businesses are transferred, but on average, they represent the best of the entrepreneurial ecosystem being passed from one owner to another. That is much more important for very small businesses.

According to my research, whether we are talking about revenue, number of employees, survival rate or the size of businesses at start up and dissolution, Quebec's experience shows that, in Quebec and Canada, we underestimate the potential contribution of business transfers in accelerating business productivity.

[Gabriel Ste-Marie, Bloc, Joliette—Manawan, QC]

In your presentation, you mentioned that Japan's population is aging more rapidly than ours. Of the business succession practices that you have observed at the international level, particularly in Japan, which ones would be good for us to adopt here?

[Marc Duhamel]

The international approach is inspired by what is being done in Austria, Finland, France and many other countries. Many countries are dealing with this problem.

The first step is awareness. We need to inform the stakeholders in the ecosystem and produce statistics so that lawyers, accountants and notaries can determine for themselves the demand for a business and assess its value. I would remind you that 50% of business owners have no idea how much their business is worth. One can imagine how much work needs to be done. We therefore need to raise awareness.

The second step is developing a national business transfer strategy. As you know, Quebec is very well organized in this regard. For example, Repreneuriat Québec was established to promote business transfers. However, this strategy must align with what is happening at the local and federal levels.

Right now, there is no federal strategy or road map that divides the work among Industry Canada, the Quebec ministry of economy, innovation and energy, and Repreneuriat Québec. There is a lot of improvisation happening.

The other—

[The Chair, Liberal, Ben Carr]

I'm sorry to interrupt you, Mr. Duhamel, but Mr. Ste‑Marie has already gone over his time by 90 seconds, so I must give the floor to Mr. Guglielmin.

Mr. Guglielmin, you have five minutes.

[Michael Guglielmin, Conservative, Vaughan—Woodbridge, ON]

Thank you to both witnesses for their testimony so far.

Mr. Fast, you mentioned in your opening remarks that you employ 700 people and about 85% of your product goes to the United States. I know you've stated previously that a 25% tariff, which had been threatened, would instantly raise prices, make your dealers less competitive, hurt their profitability and hurt your bottom line. The general theme here is that businesses require certainty when it comes to budgeting and capital allocation.

How is trade uncertainty impacting your capital investment decisions and, by association, your hiring?

[Neil Fast]

Let me approach this from two sides, first, the demand side and then our investment side of the business.

When we sell our product, we start that process. It may be 18 to 24 months before we ship, so we require a great deal of commitment from our sales staff who are independent business people in the U.S. If these U.S. businesses can't count on us to provide a product at the original prices, because of changing tariff environments, it will become an obvious solution for them to move away from Canadian suppliers. Certainly, once we lose that mindshare and market share in the U.S., that is a decades-long process to rebuild. Having tariffs raise our prices would be an immediate blow to our competitiveness.

The second is that we look at major plant investments. You would expect that, for anything of significant size, you are looking at a four- to five-year payback time before you start seeing positive cash comeback on an investment. That certainty, in terms of what our ongoing sales outlook may be, absolutely drives our ability to invest in new equipment, and then again, there's the cost basis of that equipment as it rapidly escalates. We recently shelved one investment product because over the course of the 14 months it took us to build out our business case and decide to go forward, the cost had inflated so much it became unreasonable to go forward with that project.

As a product that is made with a lot of labour input, we need the machines to aid the people, and without machines, we can't hire more people to work them.

[Michael Guglielmin, Conservative, Vaughan—Woodbridge, ON]

I want to pivot here to interprovincial trade barriers. You've pointed out that interprovincial trade barriers, such as differing energy codes and certification requirements, make it harder for companies like yours to operate efficiently within Canada. How significant are these internal regulatory inconsistencies in limiting your growth within Canada?

[Neil Fast]

As Mr. Greer said in the prior hour, in our field it is as much regulations as it is actual trade barriers.

Construction in Canada is ruled by a national building code, but that becomes fractionalized at a provincial level and then again at a city or a regional level. Sometimes it is, with common sense, that a product in the rain in Vancouver should perform differently from how it performs in the snow in Winnipeg. Oftentimes, those are strictly because a local city or a province wants to put their fingers on the code. That makes it very challenging to move product back and forth.

[Michael Guglielmin, Conservative, Vaughan—Woodbridge, ON]

Are there any specific changes, or is there co-operation between federal and provincial governments that you'd recommend to lower the regulatory red tape burden to help facilitate growth and make you more competitive, both domestically and internationally?

[Neil Fast]

I would echo Mr. Greer's comments of being very excited about the talk six months ago about all of the provinces getting ready to harmonize and to eliminate trade barriers. That has gone quiet now, and I do hope that is because of hard work going on in the background and not because of jockeying for political position.

[Michael Guglielmin, Conservative, Vaughan—Woodbridge, ON]

For my last question, may I have a quick response, if you can?

At town halls in the past, you mentioned layoffs. What is your company doing to avoid layoffs, and would you be able to sustain that in the case of long-term uncertainty?

[The Chair, Liberal, Ben Carr]

Would you respond very quickly, Mr. Fast?

[Neil Fast]

We do some job sharing and have occasionally shut down for a week. That has allowed us to ride through.