Small business facts regarding company classifications

To qualify as a Canadian small business, companies must meet the following requirements: 

• You must incorporate your business
• You must have filed a tax return in the last three years
• You must have between one and 99 paid employees 

To qualify as a medium-sized business, the employee count rises to between 100 and 499 paid employees; for large company status, the number of paid employees is 500 or more. You may hear different names for small business classifications, such as: 

• Micro-micro business: Companies employing one to four people 
• Micro-small business: Companies employing five to 19 people
• Micro-business: When the above sizes are combined, making it one to 19 people
• Small business: Companies employing 20 to 99 people 

Why is small business important in Canada?

Canadians take pride in their communities. Small businesses foster community growth by creating jobs, building the economy, and inspiring the next generation of innovators and entrepreneurs.

Sense of community

Small businesses are the lifeblood of most communities. Supporting neighbourhood mom-and-pop stores, bakeries, and butcher shops keeps our money close to home and makes us feel good for supporting local. In return, these businesses help reflect the personality of our communities, towns, and cities by sponsoring community sports teams, supporting local charities, and volunteering with various outreach programs. Not only is this great advertising for the business, but it also inspires people to continue shopping locally.

Job creation

Small businesses employ 10.3 million people in Canada—63.8% of the Canadian workforce. They also create up to 150,000 jobs yearly, depending on whether the Gross Domestic Product (GDP) trends upwards. As a result, small businesses contribute to over 40% of Canada’s total GDP, all thanks to courageous entrepreneurs who took the leap towards starting their own small enterprises. 

Fearless entrepreneurs

When small business owners are willing to take risks to reach bigger and better goals, they inspire and drive innovation and growth for entrepreneurs to create new companies, which in Canada often begin as small businesses. Alfred and John Billes, the founders of Canadian Tire, and Tim Horton and Jim Charade, founders of Tim Hortons, are both great examples. 

Roadblocks and challenges facing Canadian small businesses

Small businesses are still recovering from the pandemic, especially those operating in tourism, hospitality, and other service-based industries that are vulnerable to closure mandates. Current challenges include:

• Shortage in the labour force: Labour shortages continue to affect many small business sectors, including construction, accommodation, and restaurants. Downsizing or limiting growth is the current trend—you can only push existing employees to work so much.
• Current debt: Many small businesses sought financial help to survive the pandemic. The Canadian federal loans program CEBA provided some relief, but most companies had to acquire even more debt to stay afloat. On average, the total debt per small business sits at around $160,000, with $60,000 coming from the government. Even though the economy has picked up, the debt is still there and, unfortunately, not going away. Small business owners hope for government leniency regarding repayment because they know the banks and credit unions won’t consider it.
• Supply chain problems: Shipping costs, delays, and overall price increases for goods and services comprise the bulk of supply chain issues. Affecting sectors such as manufacturing, construction, retail, and wholesale, almost 90% of small businesses feel the impact, with some saying their cost of doing business has gone up over 20%. Global economists predict it will take three to five years to stabilize the supply chain and suggest that affected companies adjust accordingly. 

Some fun facts about Canadian small businesses

Whether you’re considering starting a business or just browsing to see how your enterprise compares according to the stats, here are some fun facts about Canadian small businesses:

1. Small businesses employ 63.8% of Canada’s workforce: To put that into perspective, that’s approximately 10.3 million people. Additionally, medium-size businesses employ another 2.4 million, and nearly 90% of Canadians work for small and medium enterprises (SMEs).
2. 98% of all Canadian private sector companies are small businesses: Remember your first job? It was most likely with a small business. That leaves only 1.8% for medium-sized businesses and a whopping 0.2% for large enterprises.
3. The total number of SMEs in Canada in 2020 was 1.22 million: The pandemic wreaked havoc with these numbers, but when the smoke clears, we’ll have a better understanding of today’s actual figures.
4. More than half of the small businesses in Canada have less than four employees: 55.3% of Canadian small businesses are micro-micro businesses, with four or fewer employees. In comparison, 73.9% of small businesses in Canada have ten employees or fewer.
5. 43% of Canada’s GDP comes from SMEs: In 2020, 97% of the total businesses that exported goods from Canada were SMEs.
6. The small business survival rate is at its highest when men and women share ownership: 68.6% of small businesses live to celebrate their 10th anniversary when men and women own equal shares. Male-owned small businesses have a 61.9% chance of surviving for ten years, while female-owned small businesses only have a 57.5% chance.
7. 92.1% of employment change during pandemic closures and restrictions was from SMEs: Between 2019 and 2020, job losses amounted to -878,700, and most of these were from small and medium-sized businesses. Conversely, between 2013 and 2017, small businesses contributed 67.5% toward net employment growth of 639,200 across Canada.
8. SMEs dominate the scientific, professional, and technical services sector: Over 99% of companies in this sector employ some of Canada’s brightest, most skilled, and highly trained experts.
9. 67.9% of small businesses stay in operation over five years: New small business start-ups have more than a two-thirds chance of surviving longer than five years.
10. High-growth small businesses come from three main sectors: According to the Canadian Bureau of Labour Statistics (BOS), a high-growth firm is when a company with fewer than ten employees grows by at least eight employees over three years. Or when a company with at least ten employees grows more than 20% annually for three consecutive years or has a minimum growth of 72.8% within three years. The sectors with the highest number of high-growth firms are:

• • Quarrying, mining, and gas and oil extraction
  • Waste management and remediation services, administration and support
  • Cultural industries and information

11. Small businesses that deal in goods have a greater chance of survival: Small businesses that are service producers only have a 44.6% chance of celebrating ten years of operations, whereas goods producers fare better with a 49.6% survival rate. 
12. Over half of all small business jobs come from just five industries: 55.4% of the jobs that small businesses create come from five industries:

• • Retail (12.1%)
  • Construction (12.3%)
  • Social assistance and healthcare (12.1%)
  • Professional, scientific, and technical services (9.5%)
  • Other services (9.2%)

13. 75% of businesses in Canada are micro-businesses with one to nine employees: 78% of Canadian businesses are services-producing, while only 21.3% are goods-producing. 
14. Leaders of the most profitable small businesses say their employees are vital assets: Small business leaders with fewer than 20 employees value the skill and efficiency of their employees and give them credit for the company’s growth and success.
15. Female-owned small businesses in Canada are 58% less profitable than their male counterparts: The main barrier to having equal success is the ability to secure venture capital funding for promoting the growth and success of the start-up.
16. 73% of female-owned businesses give credit to ecommerce: Female entrepreneurs say ecommerce increases revenue potential, and 85% realize that an online presence keeps them competitive in the industry.
17. Canada’s main exporting companies: In 2021, Canada’s main export destinations for small businesses were the United States, China, and the United Kingdom. The value of exports to the U.S. between 2020 and 2021 increased from 74.6% to 78.4% for small businesses, 68.2% to 74.0% for medium businesses, and from 73.2% to 73.7% for large enterprises.
18. Baby boomer businesses are on the rise: 42% of small businesses belonged to baby boomers in 2019.
    
19. Over half of Canada’s small businesses are in Ontario and Quebec: There are 642,250 small businesses in Quebec and Ontario, which makes sense since they’re the largest and most populated provinces. British Columbia has the highest in the west, with 212,000 small businesses.
20. Quebec supplies 72% of the world’s maple syrup: In 2022, Quebec produced 211 million pounds of maple syrup from approximately 8,000 small businesses employing 13,300 people.