The Best Sectors to Run a Business

Choosing a market for your business | BCBusiness
When you’re planning a business or considering a career, weigh your options by looking at what different markets have to offer (i.e. money versus fulfilling your passion).

Despite prevalent thinking, the Canadian and American economies are vastly different, which means business planners and operators have to deal with a completely different set of plans and expectations.

Recently, Vikash Jain, vice-president at archerETF Portfolio Management in Oakville, Ontario, provided an interesting breakdown of the Canadian economy. Jain’s analysis was aimed at investors, but could just as easily provide a glimpse into business opportunities for Canadian entrepreneurs.

He showed that the Canadian economy is radically different than the American – which, because of the immensely powerful American media, likely accounts for most of our worldview regarding business sectors.

By viewing iShares ETFs (exchange traded funds, which mirror various stock markets), Jain points out that the biggest sectors of the U.S. economy are consumer goods and services, information technology, financials and health care.

The Canadian economy? Thirty-two per cent financials, 25 per cent energy, 19 per cent mining. Among smaller companies, an astonishing 96 per cent of the S&P/TSX-Venture is in either energy or minerals.

Of course, this is a reflection of two – albeit the biggest – stock markets, and so is skewed to larger companies that require big money to operate. In that, it’s probably not a true reflection of the economy. But it’s a pretty good proxy.

Also, it’s important for investors, because it means most of their money is concentrated in a few sectors – meaning that the value of personal investments rises and falls on the fortunes of extremely volatile resources and to a lesser extent, financials such as banking.

However, it’s also of some importance to entrepreneurs and existing small businesses because it points to where the business wins and the losses are likely to be.

I’ve said before that the three “re’s” – resources, retail and real estate – rule Vancouver’s (and by corollary, B.C.’s) economy, and this adds another layer to understanding where to operate a business in this province.

For instance, while technologies, retail, the creative industries and professional services are important, in that they account for the majority of businesses and employ a great number of people, they don’t generate nearly as much money as energy, minerals or financials.

This means, essentially, that if you are operating a business that’s not in energy, mining or financials, or plan to start one, you have two choices – expect to be relatively poor, or market outside the country.

For example, the U.S. has a large information technology economy, while the Canadian one barely registers. Consumer goods and services is a huge industry down south, but in Canada is part of the 24 per cent that’s “everything else.”

So, when you’re business planning or considering a career, you have to think seriously about your market (i.e. where you’re going to operate successfully).

If you want big money, it’s resources. If you want to fulfill a passion in some other sector, you’re probably going to have to settle for less and likely restrict yourself to local economies, which have some differences.

Sorry, folks, that’s the nature of the Canadian system. But at least you’ll know what you’re getting into and won’t be fooled by American statistics that are completely unrelated to Canadian ones.