Monday, December 10, 2007

R&D Tax Credits in Canada

Canada is one of the best countries to provide SRED (Scientific Research & Experimental Development) tax credits for businesses.  A Canadian owned company can get up to 70% of the money spent on SRED.  By providing tax credits, Canadian government encourages more experimentation and research.  This program is especially helpful for small businesses with limited funds.  Even if a new experiment or development fails, the business essentially gets that money back just for trying, thus reducing the risk inherent in trying new things.

At Heaven Fresh, we have done quite a bit of experimentation on process improvement and product development.  Some of these experiments worked, but others did not as we ended up abandoning them for various reasons. However, it  is the result of trying the new tools, technologies and processes with which we are able to manage all of our offices with very minimal resources.

Our efforts to improve processes and products were really an attempt to run an efficient and profitable business as we were not even aware of the SRED credits in Canada. We came to know about it through Brian Hartman of RDFM ( whom I met in a business network meeting.  RDFM helped us put a SRED claim together for a percentage of the claim as the fee for their services. The fee was only charged once the claim was approved and it was definitely worthwhile as it required expertise to determine what can or cannot be claimed and to put the actual claim together according to the Canada Revenue Agency's guidelines.

We received a check from CRA last week for our approved claim. This is a tremendous help for a small business like Heaven Fresh. As a result, we are also planning to step-up our research and development activities.  During the SRED claim process, we also learned another government program  called IRAP (Industrial Research Assistance Program) where the government provides financial and business assistance for research and development.  We have scheduled a meeting  with the IRAP adviser on December 17, 07 and I will post more on IRAP once I get further information.

If you are a Canadian business, I would strongly encourage you to get in touch with Brian Hartman at RDFM and you might be surprised to find out that many of your "routine " activities qualify for the SRED credits.


Saturday, December 1, 2007

Loonie effect on Canadian business

Canadian Loonie has been strengthening against US dollar for quite some time now. Last month it hit parity with the US dollar. Although, the prices for Heaven Fresh products in Canada have been higher than the prices in the US from the very beginning, we have been getting much more calls and e-mails from Canadian customers complaining about the higher prices. Since the Canadian dollar is equal to the US dollar, Canadian consumers expect the US and Canadian prices of various products to be the same as well.

The cost of doing business is higher in Canada and the sales volume is lower therefore if we try to reduce the prices in Canada, we will simply be out of business in 6 months. However, it is very difficult to make customers understand the cost difference. Therefore, to make them happy,  we end up offering discounts to the customers who are really upset about the price difference.

Our prices in Europe and Middle Eastern offices are even higher than Canada due to the similar reasons, but we do not face the same challenges as we face here in Canada because customers in those countries do not have the luxury of driving a couple of hours to the largest economy of the world to buy cheaper goods.

I totally understand consumers' frustration in Canada for paying higher prices for the same products than the US consumers as I was in the same shoes before starting the business. But running Heaven Fresh for last few years has made me more aware that although in North American  we, the Canadians,  live in a separate country.  The government policies, the business environment and the costs of running a business are different here.  As Canadian citizens, we enjoy a lot of social benefits which the US citizens do not and the higher product prices are a small payback in return for all that. What do you think?