By Feruza Djamalova, co-founder and senior corporate immigration attorney of Law firm Sobirovs.
Entrepreneurs are a powerful engine for innovation and economic growth. They take risks, create jobs and are the backbone of the Canadian economy. Every year, thousands of entrepreneurs, startups and business owners enter the Canadian market. As corporate immigration attorneys, we work with entrepreneurs from around the world and observe their strenuous journey to establish and operate a business in Canada.
On this journey, they face many unique obstacles that I call “the four challenges of immigrant entrepreneurs” in Canada. In this two-part article, I’ll walk you through these challenges and give you some suggestions for overcoming them.
It is important to note that I will focus on a very specific type of entrepreneurs – entrepreneurs and investors who want to establish small and medium businesses in Canada (the initial investment is usually less than $500,000) with the vision of turning their business into viable, to make highly profitable businesses in the future.
Challenge 1: Owner Operator vs. Entrepreneur
The first challenge faced by entrepreneurs and investors in Canada arises at the beginning of their journey when a decision is made to do business in Canada. Foreign investors and entrepreneurs often try to play it safe and seek safe market penetration strategies by focusing on opportunities that have traditionally been considered low risk. For example, business ventures that rent assets or rental properties are popular business models among immigrant entrepreneurs entering Canada.
Another favorite type of business model that immigrant entrepreneurs seem to prefer is an owner-operator style. However, it is not enough just to start your own small business in Canada to take advantage of one of Canada’s corporate immigration programs. Most immigration programs in Canada are designed to encourage entrepreneurship that would add value to the industry.
For example, if you open another grocery store or other ethnic restaurant in Toronto, you are definitely taking a risk and starting a new venture. But for immigrant entrepreneurs to take advantage of Canadian corporate immigration programs, it is not enough to do what has been done many times before. Suppose that by setting up your restaurant you are not innovating and creating new satisfaction or new consumer demand. In that case, you’re just betting on the increasing popularity of dining out in your area, which may not be considered real entrepreneurship by Canadian immigration authorities, but rather an owner-operator of sorts.
True entrepreneurship, as explained by Peter Drucker (regarded as “the father of modern business management”) in his book Innovation and Entrepreneurshipinvolves applying management concepts and management techniques (questions: “What is the value to the customer?”) to your business, such as standardizing the product, designing processes and tools, setting the standards to drastically reduce the return on resources improve or even create a new market and a new customer.
Entrepreneurship in this sense is what was considered by many Canadian provinces that were designing their investor immigration programs for foreign entrepreneurs who wanted to do business in Canada. Therefore, for individuals who want to immigrate to Canada through corporate or investor immigration programs, it is not enough just to start a new small business. They should strive to become entrepreneurs, as Peter Drucker pointed out.
This is challenge one, and to meet this challenge, immigrant entrepreneurs must strive to: innovate. Go beyond just running a small business with a mindset of avoiding risk and saving existing resources. Your focus should be on innovation instead. Ask yourself, what can I innovate in my company or industry? How can I add value for our customers? Consider using new technology in your business (e.g. using robotic nail technicians alongside human technicians in your nail salon) or developing new methods of serving your clients through standardization of your processes. So the solution for Challenge One can be avoiding thinking between owner and operator and setting bigger goals and visions for your business. Strive to become a true entrepreneur and not just a small business owner.
Challenge 2: Resource Allocation
The second challenge concerns the allocation of resources. Most small and medium investors operate on the principle that ‘resources are limited’ and so ‘we have to be careful about spending’. While thrift and prudence are good qualities, especially when entering new markets that involve high risk-taking, operating on the principle of “maximizing cash conservation” may not help foreign entrepreneurs in the long run.
To succeed in a new market, entrepreneurs must invest not only in acquiring assets, but also in attracting the best talent. Unfortunately, in our practice we see that some foreign investors struggle to build and maintain their businesses, often resulting in huge losses of their investment funds, mainly due to underinvestment in their human capital. Only talented employees and professionals can help entrepreneurs move their businesses forward. Investing in attracting and retaining the best talent is the most important investment a foreign entrepreneur should make.
If you do this part right, your business is more likely to thrive and grow. Unfortunately, preserving resources and slowing down the recruitment process of talented employees for your enterprise can break it. For example, our client, who runs a large logistics company in the Middle East, struggled to build a customer base in Canada and suffered significant losses until he hired a talented marketing specialist who helped him build a sales pipeline that resulted in a seamless customer acquisition for his business.
So, to overcome challenge two – resource allocation – our advice to entrepreneurs would be to find and hire the best individuals you can find to help you move your business forward. You can and should be frugal in other areas of your business, but when it comes to your employees, invest generously in acquiring and retaining talent, as this investment typically yields the highest return on your investment if done right.
Please note that this article is not legal advice, but rather our attempt to share our personal opinions and tips based on our observations of our clients’ travels in Canada.