By Feruza Djamalova, co-founder and senior business immigration lawyer of Sobirovs Law Firm.
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Entrepreneurs are a powerful force driving innovation and economic growth. They take risks, create jobs and are the backbone of the Canadian economy. Thousands of entrepreneurs, startups and business owners enter the Canadian market every year. As business immigration lawyers, we work with entrepreneurs from all around the world and observe their strenuous journey to create and operate a business in Canada.
During 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 provide some suggestions on how to overcome them.
It is important to note that I will focus on a very specific type of entrepreneurs—entrepreneurs and investors seeking to establish small and medium businesses in Canada (initial investment is usually under $500,000) with a vision of turning their businesses into viable, highly profitable ventures in the future.
Challenge 1: Owner-Operator Vs. Entrepreneur
The first challenge that entrepreneurs and investors face in Canada occurs at the very beginning of their journey when a decision to do business in Canada is made. Foreign investors and entrepreneurs often attempt to “play it safe” and look for safe market penetration strategies by focusing on opportunities that have traditionally been deemed low-risk. For example, business ventures that involve leasing an asset 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 just enough to start your own small business in Canada to benefit from one of Canada’s business 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 convenience store or another ethnic restaurant in Toronto, you surely are taking a risk and creating a new venture. But for immigrant entrepreneurs to benefit from Canadian business immigration programs, it is not enough to do what has been done many times before. Suppose by setting up your restaurant, you are not innovating, creating a new satisfaction or new consumer demand. In that case, you are just gambling on the increasing popularity of eating out in your area, which might not be viewed as true entrepreneurship by Canadian immigration authorities, but rather an owner-operator type of business.
True entrepreneurship, as explained by Peter Drucker (considered to be “the father of modern business management”) in his book Innovation and Entrepreneurship, involves applying management concepts and management techniques (asking, “what is the value to the customer?”) to your business like standardizing the product, designing process and tools, setting the standards to drastically improve the yield from resources or even creating a new market and a new customer.
Entrepreneurship in this sense is what was contemplated by many Canadian Provinces that were designing their investor immigration programs for foreign entrepreneurs wishing to do business in Canada. Therefore, for individuals who want to immigrate to Canada through business or investor immigration programs, it is not just enough to create a new small business. They need to strive to become entrepreneurs, as pointed out by Peter Drucker.
This is Challenge One, and to overcome this challenge, immigrant entrepreneurs should strive to innovate. Go beyond just running a small business with a mindset of avoiding risks and conserving existing resources. Your focus should be instead on innovation. Ask yourself, what can I innovate in my business or industry? How can I add value for our customers? Consider using new technology in your business (for example, using robotic nail manicurists in addition to human technicians in your nail salon) or developing new methods of providing services to your customers by standardization of your processes. Thus, the solution to Challenge One could be avoiding owner-operator thinking and setting bigger goals and visions for your business. Strive to become a true entrepreneur and not just an owner of a small business.
Challenge 2: Allocation Of Resources
The second challenge involves the allocation of resources. Most small and medium investors operate on the principle that “resources are limited,” and thus, “we have to be cautious with spending.” While frugality and caution are good traits, especially when entering new markets that involve taking high risks, operating on the principle of “maximum preservation of cash” may not serve foreign entrepreneurs in the long term.
To succeed in a new market, entrepreneurs need to invest not just in acquiring assets but in attracting the best talent. Unfortunately, in our practice, we see some foreign investors struggling to build and sustain their businesses, often resulting in huge losses of their investment funds, specifically due to underinvestment in their human capital. Only talented employees and professionals can help entrepreneurs move their ventures forward. Investing in attracting and retaining the best talent is the most critical investment that a foreign entrepreneur should make.
Get this part right and your venture is more likely to flourish and grow. However, preserving resources and delaying the recruitment process of talented employees for your venture can, unfortunately, break it. For example, our client, who operates a large logistics company in the Middle East, had been struggling to build a customer base in Canada and incurred significant losses until he hired a talented marketing specialist who helped him to build a sales pipeline that resulted in seamless customer acquisition for his business.
So, to overcome Challenge Two—allocation of resources—our advice to entrepreneurs would be to find and hire the best individuals you can find to help you to 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 tends to yield the highest return on investment if you get it right.
Please note that this article is not legal advice, but rather it is our attempt to share our personal opinions and tips based on our observations from our clients’ journies in Canada.
