What is the contribution of small and medium-sized businesses to the Canadian economy?

Jean Chung

Jean Chung

MBA, CGA, CPA

What is a small and medium-sized business in Canada?

A small and medium-sized business is one that employs less than 500 workers according to Statistics Canada.  Small businesses are those that have less than 100 workers, and medium-sized businesses employ between 100 and 499 employees.

Small businesses are the cornerstones of our local communities. They create jobs, spur innovation, and generate wealth for Canadians across the country. Local businesses have always been there to support local economies. And now is the time for them to be supported more than ever before, so they can survive the economic impact of the pandemic.

It has been a very challenging time for small and medium-sized businesses in Canada and around the world. A lot of businesses, unfortunately, might not make it to the other side. Not to mention the loss of employment of so many workers in so many industries. If you have a small business and you want to learn more about the COVID- relief measures, taken by the Federal government, please check here. The Alberta government is also providing financial support to SMBs through its SMERG program. 

So, let’s have a look at the real contribution of small and medium-sized businesses to the Canadian economy. These statistics will vary from one year to the next, but the numbers are fairly up-to-date (2019) based on the latest survey by Statistics Canada.

Highlights of Small and Medium-sized businesses (SMBs) in Canada:

  • 1.23 million businesses in Canada are SMBs.
  • Over 55% have less than 4 employees (i.e. the micro-businesses).
  • SMBs represent about 99.7% of all businesses in Canada.
  • Of the 99.7%, 1.9% are medium-sized businesses.
  • Small businesses employ about 69% of the workers in the private sector or about 8.4M workers. Medium-sized businesses employ another 20%, or an additional 2.4M employees.
  • Small businesses account for about 70% of jobs created in the private sector, or roughly about 100,000 jobs every year.
  • 57% of small businesses in Canada are in Ontario and Quebec.
  • SMBs provide about 89% of the employment of the working population in Canada. In British Columbia and Saskatchewan, for example, the percentage is even higher at about 94%. It is 91% in Alberta and small and medium-sized businesses employ approximately 1.4M workers.
  • The top four industries employing the most workers for SMBs are wholesale and retail, accommodation and food services, manufacturing, and construction, accounting for 54% of the jobs, or roughly 5.9M jobs.
  • SMBs contribute about 54% of the Canadian Gross Domestic Product (GDP or simply the national income ‚Äď the total amount of goods and services produced in the country in one year).
  • SMBs contribute to about 59% of the total value of exported goods for Canada. In terms of the number of exporters, the percentage is higher at 89%.
  • Only half of the small businesses survive after their 5th year.

The impact of SMBs on innovation

SMBs have been the driving force in terms of innovation in the country for many years. Small businesses are more flexible, innovative, and susceptible to adapt to technologies and economic changes.

They are the ones spearheading the country’s innovation. Entrepreneurs in small and medium-sized businesses come up with new products, services, and even better ways of doing business.  Innovation can sometimes refer to a particular part of the development of a new product or service, usually having to do with a specific type of technology. They are affecting the economy across so many industries. Innovation can take place in one industry, but there are often spill-over effects on other industries. 

Governments at all levels have, for many years now, set up the infrastructure in many cities to encourage small entrepreneurs to develop their businesses by providing fiscal incentives and support systems. It is hard for entrepreneurs to thrive without a proper tech ecosystem. We find the major tech ecosystems in Canada in Waterloo, Montreal, and Vancouver. Calgary and Edmonton are up and comers.  

Some of the most well-known Canadian tech companies are Shopify, Slack, and Constellation software. These companies began their journey as startups and became juggernauts.

As you can see from above, SMBs are the backbone of the Canadian economy in so many ways. It shows to what extent Canadians are entrepreneurial and willing to take risks to create businesses. It is likely that this trend will continue as workers prefer to create their own businesses because of the uncertainty and unpredictability of full-time employment in the oil and gas industry in Alberta.

Having your own business and feeling your own boss can be rewarding in so many ways, but it is a lot of work. If you want to learn more about the main business tips before starting your own business, please check here.

The pandemic is likely to have a major impact on the survival of so many people’s small businesses across the country. However, Canadians are genuinely entrepreneurial and willing to take risks. There will come a time when the pandemic will be in the rearview mirror and we have to remain positive about the future.

Disclaimer:

The information in this blog is not intended to provide legal, accounting, or tax advice. It is intended for informational purposes only. You should obtain professional advice from your accountant or lawyer before acting on any information in this blog.