It’s officially holiday season, so we decided it was time to survey Canadian finance professionals to see what’s on their wish list – both professionally and personally.  

Dominic Piscopo, CPA

Dominic, is an analyst on the Finance Planning and Analysis team at Rewind. Trusted by over 100,000 companies worldwide, Rewind builds apps to help businesses protect their critical SaaS and cloud data. Dominic’s wish list iincludes a return to greater efficiency in Rewind’s marketing channels and better work-life balance for his team.

A short wishlist with great potential 

It’s safe to say that 2022 was one for the books. Both personally and professionally, I’ve celebrated a number of accomplishments and even learned a lesson or two. With 2023 in near sight, topping my holiday wish list this year is a return to more efficient marketing channels. 

Apple made some changes to their privacy policies earlier this year, which impacted how targeted ads work and their overall effectiveness. Many companies saw efficiencies suffer because of this – Rewind included. Combined with the economy shifting from a “growth at all cost” stage to an “efficient” stage, we have had to adjust our ad spend to meet efficiency metrics. This can often come at the cost of growth, so one thing I’m wishing for this year is being able to boost our ad spend while maintaining efficiency at the same time.

Second to this, I also want to see, and contribute to, a more consistent work-life balance for the accounting department. This is something that Float is currently helping us achieve. We’ve gone through some large implementations this year – one of them with Netsuite – to streamline and introduce greater efficiency for the team. Like many other companies, Rewind saw a small reduction in headcount this year given the current economic environment. Ideally, I would like every member of our team to reach a good balance where they can get their 40 hours in, while still being well-rested, productive, and not overworked. I know this will have a positive impact on the culture in our department.

Expense management can be really daunting, busy, and driven by rigid deadlines and tedious work. We’re hoping that once the full implementation of Float is complete, we’ll be closer to minimizing this burden and fulfilling my holiday wellness wish for the team. 

My personal wish list:

• Alo Yoga gear for a comfortable return to office wardrobe to match the business goals of improving overall wellness
• Renew my Athletic Greens subscription to help support a healthy 2023
• New ice skates for winter activities to make the harsh Canadian winter more enjoyable

Kirsha Campbell, CPA, CMA

Kirsha Campbell, is a trusted consultant who helps CEOs, business owners, and entrepreneurs scale and increase their profits and cash flows through strategic financial systems. This year Kirsha wishes for greater automation tools to help her clients improve efficiency and profitability, along with a shift in policy from Canadian finance leaders.

Giving the gift of greater efficiency and time

One thread that connects all my clients is that they are extremely busy and pressed for time. For this reason, one of my holiday wishes is to implement powerful automation tools that optimize their financial workflows and business processes. This will allow them to eliminate menial tasks, save time, and drive greater efficiencies. Some key examples are introducing Dext to manage receipts and Quickbooks to organize transactions and analyze key metrics. I believe the right smart tools can help a business scale and grow exponentially, so I’m definitely going to prioritize this heading into the new year.

Given that my clients are in various industries – food and beverage, construction, health and education – my other holiday wish is to see a shift in financial policy. At the federal and provincial level, I want leaders to explore modifying current regulations to better support business owners and companies. For instance, I work with non-profit organizations who are not yet considered a “charity” despite operating like one. While these organizations don’t currently meet the criteria to officially register as a charity, I’m hoping to see some change to this policy in the near future. This will enable my clients and organizations alike to tap into the GST rebate benefit and more. 

Finally, I also want to be able to support my clients in a more impactful way by offering a fully customized approach to improving their financial systems. Not only do I want to understand the current state of their business, but I also envision having deeper conversations about their goals, dreams, and expectations both over the short and long term. 

My Personal Wish List

• Enjoy some rest and relaxation for myself and my two boys
• Provide food, clothes, and daily necessities to those who need it most 
• Expand my collection of gym equipment and stay active 

Regan McGrath, CPA, CA 

Regan is the CEO and founder of Metrics, a professional chartered accounting firm serving clients across Canada. Established in 2014, Metrics was one of the first public accounting practices in Canada to be completely digital and is an expert in cryptocurrency. Aside from educating Canadian CPA’s on the future of commerce and accounting, Regan also has some wishes for the new year ahead.

The season of working smarter not harder

Nowadays, automation has really taken a lot of the manual work off our plates – especially when it comes to bookkeeping. For this reason, my holiday wish is to see everybody in public practice take on more high-end, strategic work and let smart automation tools handle the low-value work. 

I’ve recently started to see a lot of accounting firms offer monthly subscriptions and packages for bookkeeping. However, with technology taking over, we no longer need to spend time and attention on these services. There’s a great US study called the Rosenberg survey that shows an increase in firms taking on more advisory work and less low-end compliance and bookkeeping jobs. This is the future of accounting and commerce and it’s my wish for all public practices to adopt this mindset and scale their business to offer more strategic, higher value services. 

Another holiday wish is to see advancement in Canadian regulation on cryptocurrency and blockchain assets. I want us to be able to adopt them, rely on them, and fully understand the taxation of these assets. It’s a huge problem for our government because they don’t have the appropriate structures to audit and fully understand cryptocurrency.

My final holiday wish is for our industry to charge higher rates. If we look at the most successful companies – especially the Big Four – they aren’t struggling with how much they charge. There’s a big gap in the industry and I know this from engaging with various Canadian accountants. People are billing too low and sometimes it can be a challenge to charge higher and pitch advisory jobs that are more valuable. I would encourage accounting and finance leaders to be dramatic, know their worth, and double their rates. Even if you were to lose half of your clients, you would reduce your workload and still earn the same amount of money. This is something we’ve done at Metrics and it has enabled me to pay higher wages and created more opportunity to focus on higher value work. As a result, we love our jobs even more. 

My Personal Wish List 

• A speedy completion for my new home renovation 
• To land a government consulting contract and write the tax laws for the metaverse

Tony Ayala

Tony is the President of Queen Street Bakery, a Toronto-based producer of premier gluten-free, dairy-free and nut-free breads and baked goods. Launched in 2018, Queen Street Bakery quickly grew from a local bakery into a nationally distributed grocery brand. With Tony at the helm leading the company and the finance department, he has a few holiday wishes he’s hoping will come true for 2023.

Getting to grips with food inflation for the holidays

When I think of my holiday wishlist, the first thing that comes to mind is food inflation. In Canada, food inflation has hit a high of 7.5% and continues to be a big concern in the food industry and within our company. It’s tough to see the price of food rise so much because wages aren’t increasing at the same pace. So, my main holiday wish is to see food inflation get under control so that Canadians can shop for basic necessities like milk, bread and eggs, without the stress of expensive prices.

At Queen Street Bakery, food insecurity has always been a key area of focus for us. Since we have our own production facility, each month we produce a little bit extra and donate 1,000 loaves of bread to the Salvation Army and other food insecurity organizations. Our staff loves to do it and we know how much of a difference it can make for families, especially during the holiday season.

When I put my FP&A hat on, I can tell you that I have a handful of holiday wishes. Our team recently transitioned to Xero, which is our third software migration since we started in 2018. As we continue to grow, I am constantly relooking at our systems and how we can automate more and drive greater efficiencies. However, transitioning to new systems always comes with a learning curve and my wish is that our team acclimates quickly to Xero and sees the value it brings to the business sooner rather than later. 

My other wish is to eventually introduce corporate cards to our team. Right now, employees are using their personal credit cards and have to create expense reports, which can be stressful because they have to spend their own money and wait to be reimbursed. Bringing in corporate cards will alleviate a lot of this stress and streamline the expense management process for everyone in general. As we grow and scale at Queen Street Bakery, this is definitely high on my wish list.

My personal wish list

• A SMEG toaster 
• Queen Street Bakery Merch! Branded aprons and cutting boards to fuel the baker in me 

We all know the traditional C-suite route for finance professionals: the education, the professional certifications, the standard roles (e.g. a stint with one of the Big Four, followed by controller experience, with maybe a dash of treasury). 

But that straight climb up the career ladder isn’t for everyone. 

It certainly wasn’t for Paritosh Gupta, CFO of Toronto-based integrated home health care provider Felix Health. In a recent interview with Float CEO Rob Khazzam on the Retained Learnings podcast, Gupta shared the unconventional CFO path he’s taken and the important lessons he’s learned as a finance leader. 

Lessons from Lehman Brothers

Unlike most CFOs in Canada today, Gupta doesn’t hold a CPA designation. In fact, he’d never even aspired to a finance position, much less that of CFO. “I didn’t want to get into finance at all,” he said. “I come from a family that runs steel manufacturing factories, so I’ve always loved physical operations.”

But a finance internship from his B-school changed all that. “I was fascinated by how you could transform money into more money. So when I got an offer from Lehman Brothers, I decided to take it even though finance had been pretty much not what I’d wanted at all.”

Gupta was only 25 when he started working as a senior analyst at Lehman Brothers in 2007. It was a tense time at the investment bank, with senior team members checking Lehman stock prices on Bloomberg every night—and a surreal experience for Gupta when the company finally went under the following year. “No one expected it,” he said. “The talk was, Bank of America would step in. So when I got to the office that morning, everyone was shell shocked.”

Despite the downsides of that experience, Gupta learned an invaluable lesson. “I used to keep Excel spreadsheets tracking my net worth over a period of years,” he said. “I still love doing this. But back then, I thought of the process as a linear thing. So, you know, I could say, this is how much I’ll make each year, how much I’ll save, how much I’ll invest. But that year, it didn’t pan out that way. And I realized, life is way more non-linear than my Excel sheet.”

From doing deals to CFO

After Lehman Brothers, Gupta and a few friends founded a startup in the tech space. When that didn’t work out, he found himself in a VP role at Masan Group, buying and building businesses in Vietnam. “I went there against the advice of literally every person I spoke with,” he said. “But it ended up transforming my life.” 

He helped the company acquire the Nui Phao mine, and began working with the team tasked with building it. Two years later, the CEO of Masan Group approached him about taking on the mining company’s CFO role. “So suddenly, I’ve gone from being someone doing deals and monitoring, to being the CFO helping to build this mining company from the ground up.”

But being CFO wasn’t really what Gupta wanted. “I was very resistant to taking on the role,” he told Khazzam. “Looking back, it transformed my career. But at the time, I just did not want to be CFO.”

Part of the reason for his resistance? “I thought it was a role for accountants,” he explained. “So the biggest surprise for me was the realization that, while you do need a grounding in finance and accounting fundamentals, ultimately the role itself is a forward looking role.” 

As a CFO, you’re not only guiding and making sense of what’s happening, you’re also looking forward to where the business needs to be, and then charting the path to get there. “That’s what really drew me in,” Gupta noted. “Being CFO wasn’t at all what I thought it would be.”

The startup CFO

Another aspect of this CFO role appealed to Gupta: “I had to get into the weeds, get dirt under my fingernails. Handling all the mess that comes with building a business up from scratch. And I absolutely loved it.”

This theme of being a builder is one that runs through the course of Gupta’s CFO career. The bottom line? Building is something Gupta loves, whether it’s building teams, functions, or products. “At a startup, things break all the time, there are always fires to put out, and no one else to handle it but you,” he said. “But it’s all worth it in the end, when you can look back and see the transformation, see what you’ve achieved as a team.”

Working with startups brings unique challenges, however. For example, as a company’s first CFO, you’re frequently working with a rudimentary finance and accounting team. Such teams often have the heart, but not necessarily the experience. 

At one startup he joined as the company’s first CFO, Gupta was told a Big Four audit was part of the mandate. But it soon became clear the books were a mess: so much of a mess, the only place they could find the supporting documents they needed for hundreds of thousands of line items was in the email inbox of one of the accounting executives. 

“So there I was, working with a very young, inexperienced team, trying to get through our first audit,” he said. “I don’t remember a single work day during that time where we left the office before midnight. But in the end, we got it done.”

Strong bonds and faith in your team

There are two reasons why this particular experience has stayed with Gupta through the years. “When you’re working through this kind of situation with your team, you build bonds that can’t be built during the good times,” he said. “You build strong bonds.” To this day, he’s close to the people on that team, and they still talk about what they went through to build that startup’s finance department so many years ago. 

And then there’s the faith he put in his young team. “I realized I’d come up the same way,” he pointed out. “I didn’t have a clue how to be a CFO, but I became the CFO for a billionaire’s company at the age of 28, because my CEO put his faith in me and backed me. So I got to learn on the job. And sure, I made mistakes, but I learned, and I executed. I executed well. And I realized I’d done the same with my team. I put my faith in them. I backed them. And they delivered.”

From mining to tech

One key aspect of Gupta’s CFO career has been his shift from mining to tech. “Mining is a business where your upside is pretty much capped, because there’s only so much you can dig out of the ground,” he explained. “So the focus there is on the downside, so things don’t go bust.”

As a result, he came into the tech industry with a very risk averse CFO mindset. “I had to shift that mindset toward understanding what happens if things do go right. How to see the upside and balance that against the downside risks.” 

He illustrated this with a story from his days at Zoomcar, India’s version of Zipcar. At the time, the company charged customers a deposit for the short-term rentals of its cars, to cover any potential damages. The product team pushed to remove this deposit in order to boost demand and eliminate friction on the front end.

“I was absolutely opposed to the idea,” Gupta said. “I said, it’s a really, really bad idea and we’re going to lose a lot of money on it. But the initiative got implemented anyway. And when we looked at the data a few weeks later, customers were still returning cars in good condition and paying for any damages.” While some customers didn’t pay up, those losses were more than covered by the increased revenue the company saw from additional bookings.

“That was a critical point for me,” he said. “I realized I had to change my mindset and try to understand the upside more. And I also realized that these were initiatives that were reversible. We could always shut them down if our losses went up. So as a tech CFO, I became much more open to experimentation.”

The benefit of c-suite experience

While at Zoomcar, Gupta transitioned from CFO to COO. During that time, he found the analytical grounding and financial understanding he had as a CFO helped him focus on the right things to prioritize as COO. “I could tell the team, if we focus on this, this could be the impact.”

Since then, he’s come full circle back to a CFO role at Felix Health. “My COO experiences made me a more well-rounded professional by giving me a better perspective on the other pieces of business, like product, marketing, and the customer,” he said. “So now when I have my CFO hat on, I have a better appreciation of the on-ground impact of cost cuts, for example.”

The ultimate outcome of his experiences across these two C-suite roles? “Being a CFO made me a better COO, and being a COO made me a much better CFO.”

Advice for those with CFO dreams

For finance professionals looking to one day step into a CFO role, Gupta advised, “A CFO is a business leadership role. So build a well-rounded view of the business you’re in, and learn how to communicate it to others. Spend as much time on the ground as you can, so you really understand the pulse of the business.”

As he pointed out, it’s a given that as a finance professional, you already have the right grounding in finance and accounting fundamentals. What you need to develop is the ability to explain what your business does, and a real appreciation for how it runs. And the best way to do this? Step out of your comfort zone and get involved in other aspects of the business. 

Let’s start by getting all the stereotypes out of the way: in one corner sits the bean counter, the penny pincher, focused solely on the numbers and how much money is going out the door.

In the other corner sits the executive who oversees what is largely perceived as a cost centre – the place where valuable resources are put towards developing creative assets that may or may not help the bottom line.

Like most stereotypes there may have been a grain of truth to this in the past, but hopefully most CFOs and CMOs don’t see each other this way today. They need to have a healthy relationship based upon mutual respect and a shared understanding of their common objectives. Otherwise, a lack of alignment between these two functions can make it difficult for organizations to weather the challenges in front of them.

As they look ahead to 2023, for instance, Canadian businesses are grappling with high inflation, prolonged supply chain disruption and ongoing questions about where employees should work. CMOs need to continue building strong brands despite these issues if they are going to appeal to cost-conscious customers. CFOs, meanwhile, have to ensure marketers’ efforts deliver the intended return.

The data behind the stereotype 

Toronto-based media consulting group Empathy Inc. has been conducting a research study that surveys about 50 representatives from both leadership functions for the past two years. The most recent iteration shows conversations between CFOs and CMOs are improving, but there are important discussions they still need to have.

Despite ongoing economic uncertainty, for instance, 83 per cent of CFOs believe they will increase marketing budgets in the next fiscal year. This was substantially higher than those in the CMO camp, where 73 per cent predicted they would have more resources in 2023.

According to Empathy’s president Mo Dezyanian, greater finance and marketing alignment may be a byproduct of the COVID-19 pandemic, which forced many in the C-suite to work more closely together than ever before.

“For the past few years, all of a sudden marketers have had to be concerned with things like cash flow, which traditionally wasn’t their problem, or their jurisdiction,” Dezyanian told Retained Learnings. “The gaps in terms of their outlooks and their priorities aren’t as wide any more.”

When it comes to setting goals, however, six out of 10 CFOs feel they don’t have enough information to set marketing goals, compared with 73 per cent of marketers who have greater confidence in identifying the right targets. Amrita Gurney, Float’s head of marketing, said this is part of an education process that has been ongoing between CMOs and their peers in finance. 

“Marketing is understandably a black box to people who don’t work in this department,” she said. “It’s a broad discipline and there isn’t a perfect science to measure direct returns from every investment.”

Building a better budgeting process

One way to get a better handle on ROI could be fine-tuning how budgets are developed. For example, the research found that more than half of CMOs begin the budgeting process two to three months before the new fiscal year, but only 10 per cent of finance leaders get involved that early.

During turbulent periods like the pandemic – and even now with a potential recession looming – Dezyanian said it’s more natural for businesses to condense planning cycles compared with times of relative prosperity. The real question is whether budgeting can become a more collaborative exercise between CMOs and CFOs.

At the Toronto-based CFO Centre, COO Paul Nagpal and his team help pair organizations with CFOs who can work with them on a fractional basis. He said marketing leaders have traditionally spent a lot of time preparing a budget for CFOs to approve, rather than getting their input and buy-in leading up to the discussion.

“When finance is engaged more often, CFOs are much more inclined to be onside with the budget for the next year, because they already know how things are going and they’re seeing that success,” he explained. “They’re also better able to understand the justification for either additional capital, or reallocated capital.”

Gurney agreed that taking the time upfront to share your strategy and decision-making process is the best way to create common ground with finance. 

“CFOs are responsible for stewarding the company financially – they are not our enemy,” she said. “In fact, they are our partners. Working closely with finance has made me a better marketer by better connecting marketing investments to outcomes and balancing short term and long term bets.”

Nagpal said the results of Empathy’s research indicate the next 12 months could be a critical litmus test for CFO-CMO relationships. The fact that finance leaders are projecting a larger marketing budget suggests they’re ready to let marketers demonstrate the kind of contribution they can make during difficult moments in business. Marketing, in other words, will be seen as more than a series of costly ad campaigns but as a strategic lever for revenue growth.

“If the market becomes more challenging next year, investing in marketing is a way to double down and continue to reinforce and build your relationships with your customers,” he said. “If CMOs can continue to build that trust, CFOs are going to see that putting a little bit more money towards it will then reap longer-term dividends.”

Regaining confidence in revenue projection

Reaching that point will likely require an advanced approach to managing and harnessing the power of data. Empathy’s report found more than a third of marketers rely on past performance to set new budgets versus 18 per cent two years ago. On the finance side, however, only 19 per cent of CFOs use forecasting based on historicals compared with 29 per cent in 2020. Instead, 33 per cent said they see market intelligence as key to informing budget decisions.

“It’s almost like they’ve sort of lost that confidence in this revenue projection exercise that they were so good at,” Dezyanian said. “Before the pandemic they lived through a long period of stability. Now they’re looking outside of the company for answers. That’s a great opportunity and a great message for the marketing side of the business, because that’s what marketing is always supposed to help with.”

For example, CMOs and their teams can empower finance leaders with research, consumer sentiment from focus groups and other forms of insight to complement or build upon the internal data CFOs have traditionally relied upon. Nagpal pointed out that marketing itself has become far more data-driven than the days where much of the impact from advertising seemed intangible or difficult to quantify.

It’s not just up to marketers to continue moving the relationship forward, of course. Gurney recalled her previous role with CrowdRiff, where she said the VP of Finance Jody Davis treated her as a peer, rather than taking a top-down approach. 

“He worked alongside me to share how he was modeling our budgets, and genuinely listened to my recommendations on how to make calls on investments in marketing,” said Gurney, adding that the situation is similar with Float’s finance leader, Jennifer McNamee. “Jen spends time with me to learn how I make decisions, how I measure returns, and we have a healthy back and forth on how to arrive at the right decisions.

“What I appreciate about both of them is that they know I am ultimately responsible for my department’s targets,” Gurney added. “They provide good perspective and top line guidelines that have helped me make better decisions while still having a lot of control over what my team does.” 

Nagpal agreed that the road to alignment between finance and marketing is inevitably a two-way street, where a commitment to communicate well and often will make the difference. This is something many CFOs have already been focusing on as they reimagine their role. 

“When the CFO comes in, they’re not just arriving to work with the CEO and the finance team,” he said. “They need to work across all departments, all divisions, to understand what’s happening in the business. That means marketing. It means sales. When you have that kind of visibility into the organization it just transforms the ability of the CFO to add more value. It makes the organization better, and it makes for a better CFO.”

“Unprecedented.” “Uncertainty.” “Disruption.” “Slowdown.” 

These are the one-word labels some of the country’s top finance experts chose to slap on 2022, a year that would be considered the most transformative, unprecedented and uncertain in recent memory if not for the previous two. 

It began with lingering supply chain challenges related to the spread of Omicron; record numbers walking off the job in the “Great Resignation;” an out of control housing market that only got hotter; and forecasts of slowing growth, with a chance of inflation. It ended with a series of aggressive interest rate hikes, a commodities crisis ignited by a major armed conflict in Europe, and whispers of an impending global recession. 

The only major economic trend that held relatively steady was in the labour market, where talent shortages continue to keep unemployment low and talent scarce. In the rest of the economy the only constant was unprecedented change. With inflation at 6.9%, interest rates up 350 basis points in a year (as of October) and the country’s finance minister warning of “difficult days ahead,” the economic headwinds are only recognizable to those who were working in the 1980s. The rest of us can be forgiven for feeling like they’re trying to fly a kite through a hurricane. 

Interest rates took a hike

Since the economy bounced back from the Great Recession of 2008 the world has been awash with cheap money at low interest rates. After the Bank of Canada announced the first of many interest rate hikes in March we have been rapidly transitioning to a world where capital comes at a much higher cost. Six consecutive rates hikes later (not to mention a seventh widely expected on December 7^th) Canada now boasts the highest policy interest rate in the G7.

With business owners now needing to think twice before borrowing to invest in their business, demand will likely slow even further in 2023. 

Inflation ran away

Like polio and fascism inflation felt like one of those out-dated problems our grandparents had already solved for us, but is now making an unwelcome comeback. The drivers of our current inflation challenge are many, and economists are divided on how and where it ends. 

“The path forward for inflation will determine the path forward for interest rates, which is the key principle in determining the value of stocks, bonds and cash,” said RBC’s chief investment strategist Stuart Morrow. “There are leading indications that inflation is indeed slowing.” 

Morrow is seeing signs that suggest the worst of the inflation nightmare is behind us. Housing costs and rents are starting to come down, as are used car prices, while inventories are back up to relatively normal levels following the supply chain crunch of 2021.

“We think inflation is high right now, definitely — it’s above central bank targets — but it starts to come down in the next one to two years,” he predicts. “Will it get back to below 2%, which is the central bank target for inflation? Our bets from the top of the house at RBC are something just above 2% long-term.” 

CPA Canada’s chief economist David-Alexandre Brassard, however, isn’t convinced the end is nigh for inflation, given our track record on predicting the pattern thus far. He explains that at the start of the year many predicted a brief period of transitory inflation, and given how far off those predictions proved to be, he has trouble trusting such forecasts. 

“Our understanding of inflation, and the limitation to which we can predict it, I think has been highlighted this year,” he said. “I suspect it might last longer than we expect.” 

That suspicion is driven by a newfound appreciation for just how long it takes for changes in the economy to trickle down to the consumer. He says that on one side of the equation price pressure on producers can take months to trickle down to store shelves, and the same goes for interest rate hikes. That means that despite some optimistic indicators it could take a long time to take a serious bite out of inflation.  

War remained good for absolutely nothing (sing it again) 

One of the key drivers of inflation, and by extension rising interest rates, is a trend nobody had on their 2022 bingo card, other than perhaps the Kremlin (assuming they have bingo cards in Russia). 

The economic ripple effects of Europe’s first major armed conflict since the end of the Second World War have touched nearly every part of the global economy, and Canadian businesses are not immune. When one of the world’s largest oil producers invades one of the world’s largest grain producers few corners of the economy are left unaffected. 

“Inflation was already high in Canada, but the war in Ukraine has increased inflation,” said Pierre Cléroux, the chief economist of the Business Development Bank of Canada (BDC). “When you increase the price of wheat the price of almost every food is impacted; same thing with oil, which is not only the gasoline you put in your car but also the energy that’s used by the manufacturing sector, so it’s really having an impact on businesses.” 

Cléroux adds that even though the conflict feels a world away it is already hitting home with Canada’s small businesses in the form of inflation, shipping delays and supply scarcity. 

“The fact that the war has increased inflation has forced the bank of Canada to increase interest rates faster, and for businesses it’s not only increasing the cost of borrowing money, but slowing down some sectors of the economy,” he said. 

The venture capital feast turned to famine 

The year began with near record levels of venture capital flowing into Canadians businesses, and ended on the opposite end of the graph. In the first quarter of 2022 Canadian companies closed a combined $3.7 billion in financing, marking the second most active quarter for VC activity on record, behind only the second quarter of 2021. 

In Q3 Canadian companies shared less than a billion dollars in combined financing, marking the first time quarterly fundraising slumped below a billion since COVID took a bite out of the economy in 2020, and a 71% drop from the start of the year. 

“It’s going to be a more volatile environment; the number of deals we are seeing in private equity is down, so I suspect that moving forward we’ll see more reliance on traditional banking channels for loans and access to credit,” said Andres Vinelli, the chief economist of the CFA institute. “I also suspect that this will mean that corporates of all sizes will be looking at traditional IPOs more seriously.” 

Vinelli explains that the low interest environment of the last few years inspired a move towards Special-purpose acquisition companies, or SPACs, rather than traditional IPOs. 

“We saw a sudden stop of those this year, and if that is going to be less available, and the private markets and private equity will be less available, one option that looks more and more enticing is the traditional IPO funding,” he said. 

The business fire sale was temporarily extinguished 

Ownership of Canadian businesses might be changing more frequently in the years ahead, as aging Canadian entrepreneurs look to cash out. According to Cléroux of BDC, companies were starting to change hands at a faster pace at the start of the year, when the economy was still strong and cash was cheap. Despite recent economic developments he believes those trends will pick back up soon, and be a defining feature of small business activity in the years ahead.  

“There’s a lot of entrepreneurs who are getting older — more than 100,000 are over 65 in Canada — so business transition will continue in the next five years, because people are at an age where they need to think about transition,” he said. “Yes the economy is slowing down this process, but it’s going to continue over time.” 

The housing market took its first major step backwards in decades 

Those who have watched the country’s red hot housing regions like Vancouver and Toronto over the last few decades are familiar with a market that only goes in one direction, and aggressively so. 

That bubble finally started to burst in 2022. Toronto’s MLS Home Price Index is down 18% since its March peak, while Vancouver’s dipped 8.5% in just six months. Countrywide the average home price has dropped 20% since the Bank of Canada started upping interest rates. 

“A lot of businesses working in the housing market are seeing the slowdown right now,” said Cléroux. “You could be in the construction industry, you could be selling to the construction industry, or in the real estate market, but this is having an impact on a lot of businesses” 

Despite the recent slowdown in prices and sales activity, however, many — including Brassard of CPA — struggle to imagine the trend lasting very long. He explains that the government of Canada’s recently announced immigration plan, which targets nearly half a million newcomers every year for the next three years, will ensure a steady flow of new home buyers. 

“That’s more than 1% of the population coming in year over year,” he said. “There’s going to be a push on housing, which is going to drive prices.” 

Brassard explains the steady flow of immigrants will ensure high demand for housing in major cities, while remote work spreads affordability issues further across the country. 

“Ontario and B.C. are such immigration hubs that regardless of whether people leave, you’re still going to have a big push on housing demand,” said Brassard. “Nova Scotia and Prince Edward Island are seeing a greater push on inflation, and I suspect that’s because remote workers are moving into those provinces.” 

The job market built immunity to interest rates

Prevailing economic wisdom suggests higher borrowing costs incentivize lower headcounts, as employers look to their payroll for cost-cutting opportunities in leaner times. Not so in the bizarre world of 2022, where the job market remained white hot despite steep hikes in the cost of borrowing. 

Canada’s unemployment rate reached a new record low in May when it dipped to 5.1%, and despite the aforementioned economic forces that have rocked the economy ever since, only increased to 5.2% by October. By the second quarter of 2022 the country’s job vacancy rate had surpassed a million open positions, setting a new high water mark nearly doubling that of the pre-pandemic economy. 

“This is a very unusual situation, because typically when the economy slows down you have more people looking for a job, but this time around is different,” said Cléroux of BDC. “It’s very difficult to recruit workers for two reasons: the economy has been performing well, so the unemployment rate is low, but also because we have an aging population.” 

Even the country’s aggressive immigration strategy won’t be enough to stem the tide of the upcoming retirement wave, said Cléroux, with one in five working Canadians currently over the age of 55. 

The country’s aging population will instead inspire businesses to seek more non-human alternatives, suggests Vinelli of the CFA institute. 

“I think that we’ll be seeing more efforts to automate jobs at the lower end of the pay scale,” he said, pointing to self-checkout kiosks as one example. “That’s the market solution, because there’s just not enough people to do work that is traditionally low pay, low benefits.” 

Climate risks became business risks 

The effects of climate change get a little bit more noticeable with each passing year, but Vinelli believes 2022 might go down in history as the year the inconvenient truth reached the boardroom, and seeped its way into business strategy. 

“Up until perhaps this year the discussion about climate effects had been quite abstract,” he said. “Now it’s a reality, now its palpable; we’re seeing it.” 

Vinelli explains that prior to this year high-level conversations around climate were focussed on managing the effects of a carbon tax, or some other change in regulation. Increasingly, however, he says there is an expectation that climate related risks impact nearly ever business decision.  

“As policymakers and regulators get more serious about incorporating [climate] risks the measures will be more precise, and the market will incorporate those risks in a more efficient manner,” he said. “That will have very important repercussions in how companies are financed, and what options investors have, but it’s not going to be linear; it’s mediated by the political process, and in these polarized times it will be stop-and-go.” 

Supply chains quietly normalized  

One of the few areas where economists are more optimistic is in the global supply chain. Twelve months ago constraints in global supply lines were causing huge delays, driving up costs and making everyone question the wisdom of a globally integrated economy. 

“A big chunk of the economic problems that we saw in the world in general, and in the U.S. and Canada specifically, had been supply-chain driven,” Vinelli said. “They are on the mend, and have been for the last year, and this is something that is quietly happening in the background.” 

Vinelli adds that rising interest rates have slowed demand, as has a transition in spending from goods to services with the end of COVID-related lockdowns. After all, 2022 was the first time since the start of the pandemic that most Canadians needed a vacation more than they did a bigger TV, home office equipment or a Peloton. 

“Because of the pandemic there were delays at ports, there were [production] shut downs in China, and there was strong demand as well,” adds BDC’s Cléroux, explaining that at least two of those challenges have since been resolved. “The cost of shipping a container from China to North America went from $1,600 to $20,000, but now it’s back to normal, and the delays at North American ports are back to normal too.” 

Will the New Year bring a global recession?

Looking ahead to 2023 most economists are fixated on one big unanswered question: will we see a major global recession? 

“I think that inflation has started its path down back to a more normal level. That’s the good news,” said Vinelli. “The not-so-good news is we’re seeing a very real probability of a global synchronized recession.” 

Morrow of RBC, won’t call it either way, though he admits growth is slowing in many sectors across the global economy. “We’re not going to say with certainty that it’s likely the Canadian or U.S. economy is headed for a recession in 2023,” he said. “The risks of a recession are growing, that is for sure, but at this point it’s still inconclusive.” 

“I would say it’s 70-30 — a 70% chance it’s happening, 30% chance it’s not,” said Brassard of CPA Canada, adding that even if we see a technical recession he doesn’t predict we will see anything nearly as catastrophic as 2008. “It won’t be a shock, we’re just adjusting to higher interest rates; but it won’t be fun when you go to renew your mortgage and need to pay two or three times as much interest as you did before.” 

The outlook is more upbeat over at BDC.

“We don’t think we’re going into recession,” Cléroux said. “We believe that the economy will slow down — it’s already slowing down now after two years of very strong growth — but we don’t believe it’s going to be a recession, just a slowdown.” 

Cléroux adds that businesses will undoubtedly feel some economic pain, but says the effects will pale by comparison to the economic collapse of 2008.