Local businesses are important for the Canadian economy. They make a significant contribution towards the gross domestic product (GDP) in Canada and employ a large percentage of Canadians.

However, local businesses were hit hard by the Covid-19 pandemic. When brick and mortar businesses had to close their doors, local businesses didn’t have the online platforms to compete with larger businesses.

In this article, we take a look at local business statistics in Canada including local businesses’ views on their future prospects.

Local Business Statistics for Canadians

  • 9% of businesses in Canada are small local businesses.
  • Between 2014 and 2018, there were on average 97,640 small to medium-sized local businesses created each year.
  • Almost three quarters of Canadian companies have less than ten employees.
  • 42% of small local businesses in Canada are owned by baby boomers while 24% are owned by millennials.
  • In 2021, local small businesses made up 98.1% of all employer businesses in Canada.
  • 9% of the residents on Prince Edward Island are employed by private, small to medium-sized local businesses.
  • 6% of companies employing up to 19 people saw their revenues decrease from 2019 to 2021.
  • 4% of the small local businesses expected their sales to go down in the second quarter of 2022.
  • 6% of companies with less than 20 employees expected to see a decrease in profitability.
  • Only 19.85% of local businesses with up to one hundred employees expect to hire more staff in the first half of 2022.

The definition of a small local company

Most local businesses are categorized as micro businesses or small business, although there are some medium-sized businesses too. There are different ways to determine which category the business fits the best.

According to Industry Canada, companies with less than five employees are micro businesses. If the company produces goods and has between five and one hundred employees, it is a small business. A company that provides a service is considered small if they have five to fifty employees. Medium-sized companies have between one and five hundred employees.

The Canadian Bankers Association’s definition of a small company is different because it does not focus on the number of employees, but on the companies’ credit limits. They define a business with a credit limit less than half a million dollars as a small company, while those with a credit limit between $500,000 and $1 million are medium-sized companies.

In the eyes of the Export Development Corporation, small companies are those that make less than $1 million in export sales. The Canadian Small Business Financing Program views businesses with an annual revenue below $5 million as small.

97.9% of businesses in Canada are small local businesses

According to the Government of Canada, in 2020, there were 1.22 million employer businesses in Canada. The largest portion of these businesses were small and at 1.2 million represented 97.9% of all employer businesses. 1.9%, which represents 22,725 businesses, were medium-sized and only 2,936 or 0.2% were large businesses.

Between 2014 and 2018, there were on average 97,640 small to medium-sized local businesses created each year. The number of small to medium businesses that disappeared each year was 89,227 on average. A third of small to medium-size businesses producing goods survived at least seventeen years compared with 28% of those in the service sector.

21.1% of the small employer businesses in Canada are in the good-producing sector, while 78.9% are in the service sector. 55.3% of local companies are micro companies and a further 18.6% are companies between five and nine employees. It means that almost three quarters of Canadian companies have 1-9 members of staff.

In 2019, 42% of all small local businesses were owned by the generation called baby boomers (circa 1946 to 1964). However, the millennials (circa 1985-2000) are quickly increasing their share of local businesses with 24% owned by this demographic group in 2019.

Women are becoming better represented but still earn less than men

In 2018, women accounted for 37% of all self-employed Canadians and the number of women running small businesses is on the rise, especially in the retail and service sectors. However, 58% of women who run a business make less than men in the same position. This could be because women are more likely to start a business in less valued and underpaid sectors such as child minding.

Small to medium-sized local businesses contribute over half of Canada’s GDP

The figures from 2018 show that small local businesses contributed 37.5% of the country’s GDP in the private sector. Medium-sized businesses contributed 14.4% making the total contribution from small to medium-sized businesses 51.9%.

Distribution of local companies

Ontario and Quebec have more than half of the small local businesses, with 439,694 and 250,724, respectively. In Western Canada, British Columbia has the largest concentration with 187,697 small businesses in December 2020. Nova Scotia has the most local business in the Atlantic region with 29,561 businesses.

However, the province that has the most local businesses per thousand people aged eighteen and over is Prince Edward Island with 48.7 business per thousand people. Quebec has the smallest number with 36.8 local businesses per thousand individuals.

Local businesses are big employers

A small local business might only employ a few people, but together their employment power is considerable and vital for the Canadian economy. In 2021, local small businesses made up 98.1% of all employer businesses in Canada according to Statistics Canada.

Small local businesses provided employment to 10.3 million Canadian individuals, which is 63.8% of the total workforce in 2021. During the same year, medium-sized local businesses employed 21.1% of the workforce, which is 3.4 million people, while large businesses only employed 2.4 million people, which represents 15.1% of the workforce.

The percentage of people employed by small to medium-sized local businesses is the highest in Prince Edward Island at 95.9%, closely followed by Newfoundland and Labrador at 95.6%. Quebec and Ontario have the lowest percentages at 86.1% and 86.2%.

Small local businesses have seen their revenues decrease the most following the pandemic

The statistics from the survey showed small local businesses employing one to nineteen people were the hardest hit by the pandemic. 53.6% of those companies had lower revenues in 2021 compared to 2019.

Local businesses with 20 to 99 employees faired a little better, with 41.4% of them reporting their revenues had decreased from 2019 to 2021. Just over one third (34.5%) of medium-sized businesses reported lower revenues.

Small local businesses are less likely to have a positive future outlook

Statistics Canada conducted a survey on business conditions in Canada from January to February 2022. These results show that small local business have a less positive future outlook than large businesses. They were also more likely to expect their profitability and sales to decrease.

About two-thirds (68.7%) of local businesses employing up to nineteen people said they had an optimistic outlook over the next twelve months. This is lower than for companies employing 20-99 people where 82% of them had a positive outlook while 84.6% of companies with over one hundred employees looked to the next twelve months with optimism.

Small local businesses are more likely to expect their sales to decrease

According to the survey by Statistics Canada, businesses with 1-19 employees were the most likely to say they expected sales to fall in the short term. 18.4% of the small local business expected their sales to go down in the next quarter. Less than 10% of companies with 20 to 99 or over 100 employees said the same with 9.4% and 7.8% respectively.

Similarly, when asked if they expected the demand for their goods and services to increase in the next three months from the survey, the smallest companies were least likely to expect an increase. 24.5% of companies between one and nineteen members of staff, said they didn’t expect demand to go up. The figures for companies with 20 to 99 and over one hundred employees were 38.3% and 34.4% respectively.

Figures for expectations on profitability followed the same pattern. 35.6% of companies with under 20 employees, 28.9% of companies with 20-99 employees and 19.6% of companies with over one hundred employees expected to see a decrease in profitability.

Small local businesses are less likely to take on more loans

During and following the pandemic, many businesses have been forced to seek external financing in order to survive. At the start of 2022, many local businesses had reached the point where they could not take on more debt.

26.9% of business with up to nineteen employees said they had reached the point where they could not borrow any more. For the next size companies with 20-100 employees, this figure was 16.7 and for medium-sized companies it was just 6.2% of the businesses.

Besides not being able to borrow more, 22.9% of local businesses up to nineteen employees said they expected maintaining a sufficient cash flow to be an obstacle in the first half of 2022. However, 75.8% of them said that for now, they had the cash or liquid assets to operate.

Following the pandemic, around 54% of local business in Canada have received the Canada Emergency Business Account. It is a government program providing interest-free loans up to $60,000 to small business and non-profit organisations.

Small local businesses are the least likely to increase the number of their staff

While small local businesses have historically created the most new jobs in Canada, most of them are not looking to increase the number of their employees in the near future. Only 11.9% of small businesses with up to nineteen members of staff, said they expected to hire more staff in the first half of 2022. The figure for small local businesses up to one hundred employees was 27.8% making the average for all small local businesses 19.85%.

However, local businesses up to 100 employees are less likely to expect labour challenges in the near future. 48% of the companies said they expect to have challenges recruiting and 38.55% expected challenges in retaining skilled employees. Out of the medium-sized companies, 69.4% expected issues with recruiting and 58.7% with retaining employees.

Smaller businesses are less likely to offer incentives to attract new employees

9.15% of local companies up to one hundred employees say they will offer incentives to new employees. Interestingly, this figure is almost three times higher, at 13.3%, for companies with 20-100 employees compared to those with up to nineteen employees at 5%.

Larger businesses are also more likely to offer work from home options to their employees. Only 13.35% of small local businesses say they can offer a remote work option compared to 28.2% of medium-sized companies.

Conclusion

Small to medium-sized local businesses are vital to the Canadian economy because they contribute almost half of the country’s private sector GDP. Even though almost three out of four companies in Canada employ less than ten people, small and medium-sized companies combined employ 63.8% of the Canadian workforce.

Even before the pandemic, the percentage of local companies that were still operating after 17 years was small, but the pandemic has made life for small companies even harder. Many local businesses are not optimistic about increasing their sales in the near future.

Because the survival of local businesses is vital for the country’s economy, Canadians need to support local businesses by using local services more rather than shopping online or at large chain stores.

Frequently Asked Questions

97.9% of businesses in Canada are small local businesses.

Small local businesses provided employment to 10.3 million Canadian individuals, which is 63.8% of the total workforce in 2021. 

While small local businesses have historically created the most new jobs in Canada, most of them are not looking to increase the number of their employees in the near future. Only 11.9% of small businesses with up to nineteen members of staff, said they expected to hire more staff in the first half of 2022.

9.15% of local companies up to one hundred employees say they will offer incentives to new employees. Interestingly, this figure is almost three times higher, at 13.3%, for companies with 20-100 employees compared to those with up to nineteen employees at 5%.

42% of small local businesses in Canada are owned by baby boomers while 24% are owned by millennials.

Sources