Canada – Not the US

One of the fundamental aspects of running a business in Canada is that you are running a business in Canada.  It’s something that frustrates me significantly when I read ‘how-to’ guides or best practices on the web and realise that a lot of their discussions have nothing at all to do with the reality of the Canadian business landscape.  Yeah, we are very similar to the US but in other ways, we are significantly different.  Here’s a few examples of things that change how and what we do by a wide margin:

1. Smaller Population

Canada has about 35 million people.  California has 38 million individuals alone.  We have about 8% of the population of the United States, which means when you think about it, we have 1/8th of the potential target market than the US.   If you are in the US and catch say 1% of the market, you are doing extremely well.  Here, we’d have to catch 8x the number to just be equal.

It also means that when you look at potential employees, you have a significantly smaller ‘base’ to hire from which can lead to interesting hiring decisions.  What’s a legitimate market in the US might not be so in Canada, or at least, is very much more difficult to capture at a ‘reasonable’ size.

2. Fewer Suppliers

Here’s another fun part – smaller population means fewer suppliers.  If you get a bad supplier in Canada, you might just have to live with it because there’s no competition.  You also have fewer options in terms of geographic spread – many suppliers are smaller than in the US (e.g. Alliance and ACD are both multi-warehouse companies) and we often end-up having to ship from Ontario for our stock.  Again – no choice, few suppliers.  It also means you have much less leverage – you can’t play one supplier against another.

This is particularly interesting when you look at things like shipping or our card processors.  In the US, you could ship via UPS, FedEx, US Mail or do a combination system with local and international couriers.  In Canada, once you do decent volumes there is no better option than Canada Post for residential delivery.

3. Bigger Country

We are a much bigger country than the US.  Sure, 75% of our population is within a 100 miles of the border or so, but many of our customers actually live outside of that 100 mile border zone.  It both makes e-commerce businesses highly valuable (and has driven the adoption of eCommerce at a faster rate than in the US) but also means that the cost of delivery is significantly higher as the volume of products flowing is lower (less economies of scale).

I should also add we have Quebec in there – an entire province that we get relatively few orders (proportionally) due to the language barrier.  We could target them, but then we’d have to translate the site to French, stock translated games, etc.  And again, see earlier comment about population size – there’s really only so many suppliers possible in any one marketplace.

4. Higher Costs

Lower population, fewer suppliers, less economies of scale and a bigger country all lead to generally higher costs than the US.  Add in our higher overall minimum wages and various additional costs and your general Canadian business runs at a much higher cost level than your US business.  Worst, the smaller population means for a niche business like us means that it’s harder to spread the fixed cost around, meaning overall lower profits for a longer period in my experience.

So, what do you do when your costs are higher and your market is hard to reach – up your prices of course.  You need more revenue per person, and so long as the demand curve doesn’t drop off too bad, that should work…. Which is the explanation of why everything costs more than you’d expect.

5. Less Red Tape (mostly)

On the other hand (and this is mostly anecdotal); we seem to have a lot less red tape than in the US.  For example, our ta system is a lot less elaborate than the US’s.  Getting business licenses is relatively easy as is setting up a business and so-on, so-forth.  You can actually set-up and run your own business with a lot less hassle it seems than in the US.  Again, this is mostly anecdotal.