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Featured Articles
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Feb 2010
| Source: Oilweek Magazine
| | | Border City King
| | | Wayne King highlights the entrepreneurial spirit western Canadian oil towns
| | | by Jim Bentein
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| Wayne King doesn´t have an MBA from an Ivy League university, and he certainly didn´t grow up with a silver spoon in his mouth.
But the Lloydminster-based King, who was one of six boys raised on a small, mixed farming operation outside the Alberta-Saskatchewan border city-and who remembers that his father had to work off the farm to support the family-has become one of the city´s most successful entrepreneurs.
King is president and chief executive officer of Grit Industries Inc., which grew from one employee (himself) in the early 1980s to a privately owned company employing more than 100 people and generating millions of dollars in annual sales.
A high school graduate, King worked at a series of oilfield service jobs before tapping into his farming background to adapt a grain auger to remove produced sand from heavy oil storage tanks. The unit-dubbed The Grithog-was the first of dozens of inventions to come from King´s fertile mind, a talent he says is inherited from his father, who never actually patented any inventions, but was "always tinkering" with one thing or another.
That´s not all King inherited from his father: his determination and entrepreneurial initiative appear to be as much a part of the Lloydminster milieu as the smell of heavy oil in the air.
"Luckily, Lloydminster, and the heavy oil industry, have plenty of people in key positions that are ‘support your entrepreneurs´ people," King says. "The world´s heavy oil industry looks to Lloydminster for vision and for technology to support that vision. It´s a lot of responsibility and pressure, but Lloydminister entrepreneurs are up to the challenge."
That "can-do" spirit in the city of 26,502 (according to the 2009 census), has been recognized by several outside observers, including the Canadian Federation of Independent Business (CFIB), which, using what it calls 12 "core indicators," assessed 100 cities in Canada with urban populations of 25,000 and up and placed the border city among the top five the last two years-first in 2008 and fifth in 2009.
A somewhat similar study-Canada´s Small Business Juggernaut-released in October by BMO Capital Markets Economics, looked at the role of small business throughout the Canadian economy (there are more than one million small businesses in Canada, employing about five million people, nearly half of the country´s private-sector labour force) by measuring "small-business intensity" in 111 Census Agglomerations (CAs), urban areas with populations of 10,000 and up, and 33 Canadian Census Metropolitan Areas (CMAs) with populations of 50,000 and up.
The small-business intensity rating gauged CAs and CMAs on the basis of the number of small businesses per 1,000 population.
Once again, Lloydminster was near the top of that list, placing second behind only Fort St. John, epicentre of northeastern British Columbia´s emerging unconventional gas plays. Trailing behind Lloyd on the list were Canmore, Camrose, Okotoks, Grande Prairie, and Brooks in Alberta; Swift Current, Saskatchewan; Salmon Arm, B.C.; and Estevan, Saskatchewan.
Western Canadian cities dominated the list of the larger urban area CMAs too, with Kelowna, B.C., placing first, followed by Calgary, Vancouver, Edmonton, and Victoria.
The more targeted CFIB study lumped the CMAs and the CAs together (as long as they had populations of 25,000 and up), arguing that the same standard should hold for both. (The number of small businesses per 1,000 in most larger urban centres was much less than in most smaller cities.) It included some of the same indicators as BMO, such as new business start-ups, businesses per capita, and self-employment intensity, but it also looked at areas beyond the control of entrepreneurs, such as local government sensitivity to small businesses, local taxes, and local government "paper-burden."
In the case of the CFIB study, cities in western Canada and Québec dominated, with the top 10 this year including Saskatoon; Grande Prairie; Joliette, Québec; Moose Jaw, Saskatchewan; Lloydminster; Alma, Quebec; Victoriaville, Québec; Regina; Val-d´Or, Québec; and Prince Alberta, Saskatchewan.
The City of Toronto was dead last (something that caused controversy in that city, where local politicians claimed the CFIB study had maligned the Ontario capital) and several other Ontario cities were ranked near the bottom of the list.
Ted Mallet, chief economist with the CFIB, said using the 12 indicators helped separate the wheat from the chaff, measuring truly entrepreneurial cultures from the norm.
"Just because you´re in small business doesn´t mean you´re an entrepreneur," he says. "Sometimes the reason for starting a small business is a negative, such as having lost a job."
He says the CFIB, which has 105,000 small-business members nationwide, has studied the profile of small-business people and there are some commonalities. For one, many start businesses later in life, between 45 and 65.
"They have built up an expertise in an area and they have built up some savings by then, so they perceive it is a good time to start a business," he says.
Where they live can greatly influence that decision as well, which is why the CFIB (in cooperation with the Financial Post newspaper) decided to study the culture of entrepreneurship in Canadian cities.
It found that one commonality is, as Lloydminister´s King has learned, entrepreneurs tend to attract other entrepreneurs.
"Presence is important," says Mallet. "Are there a lot of other small-business owners in the community?"
That creates a shared sense of entrepreneurship, a community in which business owners will share solutions to problems.
Western Canadian resource cities dominate the top 20 on the CFIB list, possibly because resource-based economies often create challenges small-business owners must overcome to survive.
In King´s case, when he ran into heavy competition in the market his company´s first heavy oil product had entered, he developed a product to contain oil spills and a loop device that is now used widely by gas utilities to reduce natural gas pressure when gas is moved from pipelines to regulating stations.
The list of entrepreneurial cities has provincial capitals and areas with military bases or with the presence of other large government players nowhere near the top 20, either in 2008 or 2009. Mallet speculates that this might be because a certain complacency sets in among small business operators in those cities, since they can usually be confident the same level of business activity will prevail, given the stable economies such areas tend to have.
Local governments also may not be as business-friendly in such cities, since they also become complacent.
Prairie cities dominate the list, and Mallet believes that´s traditional.
"In western Canada there has always been a high degree of small-business ownership," he says. "A lot of that is geared to the nature of the economy, with the dominance of the resource and agricultural sectors. It´s what I call the frontier aspect."
Although 2008´s oil price collapse hit Alberta towns hard, with many dropping further down the list, many of those economically hard hit cities, such as Grande Prairie, where the natural gas¬-based oilfield service sector has been hammered, continue to rank highly amongst entrepreneurial centres.
Brian Glavin, head of economic development for the City of Grande Prairie, says that while economic growth over the last year has essentially ground to a halt in the city of 50,200, you´d never know it. The population is still growing and the city is still attracting new businesses.
He thinks he knows the source of that vitality, even in tough times.
"People here are used to taking risks," says Glavin, who moved to the city three years ago from southern Ontario. "They don´t see the government as something that will support them. It´s very much a can-do attitude."
The city, which is the service centre for a region with a population of 250,000, covering much of the northwestern part of Alberta and dipping into northeastern British Columbia, was second on 2009´s CFIB list and third in 2008. The BMO study placed it sixth among smaller urban centres in Canada.
While the downturn in Alberta´s natural gas sector has hit the city´s oilfield service industry hard, it remains the major service centre for the booming Montney and Horn River shale gas plays in northeastern British Columbia, and is the "shopping centre" for much of northeastern British Columbia and northwestern Alberta, he says.
Infrastructure spending in the city this year will hit about $250 million, including $119 million for a new aquatics and wellness recreation centre, $25 million on a new school, $34 million on a new culture centre, and $28 million on a new highway bypass.
This year alone, four big-box retailers in the electronics, pet supply, home improvement, and pharmacy sectors have moved in, along with a new warehouse-style supermarket, several smaller retail outlets, five new branches of various financial institutions, four new hotels and motels, and several new restaurants.
The Alberta government has announced plans to build a new $700-million hospital (delayed for budgetary reasons), a new $24-million grain terminal is planned, and there are millions of dollars worth of other projects planned.
Glavin says the city´s entrepreneurs have consistently shown they can reinvent themselves, with an economy that includes a huge agricultural service centre, forestry facilities operated by Weyerhaeuser Canada Ltd., Canadian Forest Products Ltd., and others and the still large oilfield service sector.
But he says the recent natural gas drilling downturn means the "easy money" is gone for both job seekers and small businesses, with more stable growth expected in the next few years.
CFIB´s Mallet says western Canada isn´t the only part of the country where entrepreneurs dominate. Québec cities have consistently been in the top 20. (They did not fare as well in the BMO survey, with no Québec city in the top 10 of either the smaller or larger cities in Canada.)
"In Québec, I attribute this to what I call the co-op culture," he says. "There´s a tradition of cultural, social and economic self-sufficiency."
The same kind of "co-op culture" has prevailed for many years in Saskatchewan, possibly because of the isolation of many of its small cities and towns, he says.
There are some, however, who remain skeptical of the CFIB study.
Robert Schulz, professor of strategy and global management at the University of Calgary´s Haskayne School of Business, isn´t convinced the survey captures the newer, Internet-savvy entrepreneurs who are increasingly driving economic growth.
"What do we mean by entrepreneurship? Are we talking about another hairdressing salon or coffee shop in a small town?" he says. "Or are we talking about an Internet-related company that will help grow the economy in the future?"
He argues that the days when small-business people shared ideas at service club meetings or among other CFIB members may be fading into the background, eclipsed by the Internet and social networking sites such as Facebook.
Also, he says many small-business people now in Canada come from the ranks of new immigrants to the country and would tend not to belong to the CFIB or to service clubs.
Finally, the entrepreneurship that has been commonplace in resource producing areas in the past may also be fading into the background.
"We had what I´d call serial entrepreneurship in the past in cities like Calgary," he says, explaining that layoffs among large oil companies would produce a cadre of ex-employees who would start their own small oil and gas companies, which would grow to be much larger. The cycle has been repeated numerous times over the last half-century, but now may be somewhat on the wane.
"With the decline of the conventional oil and gas business [the shift is towards the oilsands and shale gas], huge amounts of capital are required, so only the larger companies can be involved," Schulz says. "The future will be the unconventional sector, and that´s not for small-time players."
Schulz believes any true survey of entrepreneurship should assess the export potential of the businesses that are created.
"If I open a new coffee shop that competes with Starbucks, all I´m doing is getting my slice of the pie," he says. "But if I develop a technology that leads to exports to other parts of the world, I´m baking a new pie. The real key to measuring entrepreneurship is measuring those who win export awards."
Having said that, he isn´t suggesting there isn´t a positive element involved in someone starting a small business that can create an income stream for him and a few others.
"But the real measure of entrepreneurship should be creating many jobs for others."
Schulz doubts that the true spirit of entrepreneurship is as lacking in Calgary as the CFIB study suggests (41st, tied with Winnipeg), and believes the BMO study, which ranked Calgary second amongst major centres (Kelowna was first, Vancouver third, and Edmonton fourth), may be a little more accurate.
"Maybe [business people] in Saskatchewan or Québec need to be involved in a social function [to network]," he says. "If you´re in [a small city] in Saskatchewan, you go to the Rotary Club. Whereas in Calgary, you don´t need that social function."
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