Key Small Business Statistics — 2021 (2024)

From: Innovation, Science and Economic Development Canada

Table of contents

• Foreword
• Definition
• Highlights

1. Number of businesses
   • 1.1 How many SMEs are there in Canada?
   • 1.2 How many businesses appear and disappear each year?
   • 1.3 What proportion of new businesses survive the first seventeen years?
   • 1.4 Gender-based differences in survival and birth rates.
2. Employment
   • 2.1 How many people were employed in Canada in 2020?
   • 2.2 What is the distribution of employment across the private sector?
   • 2.3 How much did employment shrink between 2019 and 2020?
3. Growth
   • 3.1 What is the proportion of high-growth firms?
4. Export of goods
   • 4.1 Which provinces have the highest concentrations of exporters?
   • 4.2 How do SMEs contribute to Canada's exports?
   • 4.3 What are Canada's main export destinations?
5. Gross domestic product
   • 5.1 How do SMEs contribute to Canada's gross domestic product?

Foreword

Key Small Business Statistics provides statistical data on the business sector in Canada, focusing on small and medium-sized enterprises (SMEs). The data are, at the time of publication, the most up-to-date statistics available to Innovation, Science and Economic Development Canada.

The current edition contains data on the following questions:

• How many SMEs are there in Canada?
• How many businesses appear and disappear each year?
• What proportion of new businesses survive?
• How many people were employed in Canada in 2020?
• What is the distribution of employment across the private sector?
• How much did employment grow between 2019 and 2020?
• What is the proportion of high-growth firms?
• Which provinces have the highest concentrations of exporters?
• How do SMEs contribute to Canada's exports?
• What are Canada's main export destinations?
• How do SMEs contribute to Canada's gross domestic product?

Definition

This publication defines a business based upon the number of paid employees.

Since self-employed and "indeterminate" businesses are not considered to have paid employees^{Footnote 1}, they are generally not included in this publication. This publication defines an SME as a business establishment with 1 to 499 paid employees. More specifically:

• a small business has 1 to 99 paid employees;^{Footnote 2}
• a medium-sized business has 100 to 499 paid employees; and
• a large business has 500 or more paid employees.

Highlights

In March 2020, in response to the COVID-19 pandemic, restrictions aimed at slowing the spread of the virus were introduced. The resulting economic contraction significantly impacted all 2020 statistics presented in this publication. These impacts are reflected in all statistics presented in this report for the reference year 2020. However, for certain statistics the most recently available data are for the reference year 2018; the pandemic impacts are not reflected in these statistics.

1. Number of businesses

1.1 How many SMEs are there in Canada?

As of December 2020, there were 1.22 million employer businesses in Canada (Table 1). Of these, 1.2 million (97.9 percent) were small businesses, 22,725 (1.9 percent) were medium-sized businesses and 2,936 (0.2 percent) were large businesses.

More than half of Canada's small employer businesses are concentrated in Ontario and Quebec (439,694 and 250,724, respectively). Western Canada has a large number of small businesses, led by British Columbia, which had 187,697 small businesses as of December 2020. In the Atlantic region, Nova Scotia has the most small businesses at 29,561.

The province with the most businesses per thousand individuals aged 18 and over is Prince Edward Island (48.7), followed by Alberta (47.1). In contrast, Quebec has the smallest number of businesses per thousand individuals aged 18 and over (36.8), followed by Nova Scotia (37.1), Ontario (37.6), and Manitoba (37.9).

Of the 1,224,293 employer businesses in Canada, 21.1 percent are in the goods-producing sector and 78.9 percent are in the services-producing sector (Table 2). Micro-enterprises (14 employees) make up 55.3 percent of Canadian businesses. By adding those businesses with 59 employees, this number increases to 73.9 percent. In other words, almost three out of four Canadian businesses have 19 employees. It should be noted that the distribution of businesses according to the number of employees varies slightly between the goods-producing and services-producing sectors.

The following four industries — professional, scientific and technical services; construction; retail trade; and health care and social assistance — account for 568,901 businesses on their own, which represents 46.5 percent of Canadian businesses (Table 3). The other services (except public administration) industry also accounts for a significant number of businesses: 112,626 or 9.2 percent of Canadian businesses. More than half (55.7 percent) of Canadian businesses are accounted for in these five of the 20 industries.

More than 99 percent of businesses in the following four industries are small businesses: agriculture, forestry, fishing and hunting; real estate and rental and leasing; professional, scientific and technical services; and other services (except public administration). However, only 85.5 percent of businesses in public administration and 85.4 percent of those in management of companies and enterprises are small businesses.

1.2 How many businesses appear and disappear each year?

In 2020, the COVID-19 pandemic likely impacted business entries and exits. However, since the most recently available data on business creation and destruction are for the year 2018, these impacts are beyond the scope of this report.

An increase or decrease in the number of businesses is the net result of the appearance or disappearance of businesses over a given period. This is often referred to as "creative destruction." Between 2001 and 2018, the number of businesses increased every year, except for two: in 2013 and in 2016, when more businesses disappeared (97,202 and 95,511) than were created (95,377 and 94,798)^{Footnote 4} as illustrated in Figure 1.^{Footnote 5} Over the last five years (from 2014 to 2018), on average, 97,640 businesses were created every year and 89,227 disappeared.

As illustrated in Figure 2, throughout the 20012018 period, the business birth rate was lower in the goods-producing sector than in the services-producing sector. It is noteworthy that the rate of business births in the goods-producing sector had an overall downward trend over the last five years, declining from 8.2 percent in 2014 to 7.7 percent in 2018. Over the last five observed years, the average birth rate in the goods-producing sector was 7.9 percent, compared with 9.0 percent in the services-producing sector. On average, every year between 2014 and 2018, 23,433 businesses were created and 21,550 businesses disappeared in the goods-producing sector, while in the services-producing sector, 74,207 businesses were created and 67,678 businesses closed.

This variation between birth rates for these two sectors can be explained in part by the entry cost and different levels of competition. If this is, indeed, the case, higher birth rates would be observed in sectors with a lower entry cost or with a higher level of competition than other sectors.

The enterprise birth rate is inversely related to firm size during market entry. The more individuals employed when a business begins operations, the lower the enterprise birth rate (Figure 3). On average, between 2014 and 2018, the birth rate was 11.1 percent, 3.5 percent, and 1.7 percent for businesses with 14, 519, 2099 employees respectively.

The vast majority of businesses had 14 employees when they began operations. Of the 97,640 businesses created on average annually from 20142018, 90.0 percent (or 87,881 businesses) had 14 employees when they were created. Over the course of this period, 8.5 percent, and 1.5 percent of new businesses began operations with, respectively, 519 and 2099 employees. Of the average 89,228 annual closures, 92.2 percent, 7.5 percent, and 0.3 percent were businesses with 14, 519, and 2099 employees, respectively.

1.3 What proportion of new businesses survive the first seventeen years?

Businesses in the goods-producing and services-producing sectors showed similar survival rates over the course of the first three years (T+1, T+2 and T+3) after their creation (T+0) (Figure 4). After the third year (T+3), business survival rates in the goods-producing sector were higher than in the services-producing sector. After five years (T+5), 70.1 percent of businesses in the goods-producing sector were still operating, compared with 67.3 percent of businesses in the services-producing sector.

After 10 years (T+10), the business survival rate for the goods-producing sector was 49.6 percent, compared with 44.6 percent for the services-producing sector. Finally, 33.5 percent of businesses in the goods-producing sector and 28.0 percent of business in the services-producing sector were still active 17 years (T+17) after they entered the Canadian market.

There is a positive correlation between enterprise survival rate and initial business size (Figure 5). Businesses that began operations with a large number of employees had a higher survival rate than businesses that began with a smaller number of employees. Of businesses that began operations with 1–4 employees, 62.5 percent were still active after 5 years (T+5), 43.5 percent were still active after 10 years (T+10), and 28.6 percent were still active after 17 years (T+17), compared with businesses that began operations with a workforce of 20–99 employees, of which 73.9 percent were still active after 5 years (T+5), 55.1 percent were still active after 10 years (T+10) and 38.3 percent were still active after 17 years (T+17).

1.4 Gender-based differences in survival and birth rates

Majority male-owned businesses showed slightly higher survival rates than majority female-owned businesses over the course of the thirteen years after their creation.^{Footnote 6} However, businesses owned equally by males and females had the highest survival rates over the period observed.^{Footnote 7} After five years (T+5), 77.2 percent of majority female-owned businesses were still operating, compared with 79.8 percent of majority male-owned businesses, and 84.9 percent of equally-owned businesses.

After 10 years (T+10), the business survival rate for the majority female-owned businesses was 57.6 percent, compared with 61.9 percent for majority male-owned businesses, and 68.6 percent for equally-owned businesses . Finally, 47.9 percent of businesses majority owned by females, 52.8 percent of businesses majority owned by male and 60.2 percent of equally-owned businesses were still active 13 years (T+13) after their creation (Figure 6).^{Footnote 8}

As shown in Figure 7, throughout the 20052018 period, the business birth rate was lower for majority male-owned businesses than for the majority female-owned businesses.^{Footnote 9} Over the last five years observed, the average birth rate for majority female-owned businesses was 10.7 percent, compared with 8.7 percent for majority male-owned businesses. On average, every year between 2014 and 2018, 10,902 businesses were created and 8,942 businesses disappeared in majority female-owned businesses, while in majority male-owned businesses, 38,924 businesses were created and 33,892 businesses closed.^{Footnote 10}

2. Employment

2.1 How many people were employed in Canada in 2020?

In 2020, approximately 15.3 million individuals were employed^{Footnote 11} in Canada. Of this number, 74.8 percent worked in the private sector^{Footnote 12} and 25.1 percent worked in the public sector^{Footnote 13} (Table 4). In 2020, the COVID-19 pandemic had significant impact on 2020 employment statistics. The effect of the pandemic on employment is discussed in section 2.3.

The distribution of the number of people employed according to business size varies considerably between the private sector and the public sector. In 2020, 88.3 percent of employed individuals in the private sector worked for SMEs, compared with 76.0 percent of those employed by public organizations of the same size.

2.2 What is the distribution of employment across the private sector?

In 2020, private sector businesses employed 11.4 million people in Canada. The majority of private sector employees worked for small businesses, specifically 67.7 percent (7.7 million), compared with 20.6 percent (2.3 million) for medium-sized businesses and 11.7 percent (1.3 million) for large businesses (Figure 8). In total, SMEs employed 88.3 percent of the private sector workforce (10.0 million individuals), highlighting the important role SMEs play in employing Canadians.

SMEs play an essential role in employing Canadians across the country. At the provincial level, the percentage of private sector employment in SMEs is highest in Prince Edward Island and in Newfoundland and Labrador, at 95.9 percent and 95.6 percent, respectively (Table 5). In contrast, this percentage is lowest in Quebec and Ontario at 86.1 and 86.2 percent. Total private sector employment in Ontario and Quebec amounts to 7,163,500 jobs, which represents 62.8 percent of Canadian private sector employment.

Distribution of employment by business size varies across industries. As shown in Table 6, SMEs account for over 90 percent of employment in seven industries: agriculture (98.7 percent); accommodation and food services (98.5 percent); other services (except public administration) (98.2 percent); construction (95.9 percent); wholesale and retail trade (95.3 percent); business, building and other support services (91.1 percent); and professional, scientific and technical services (90.0 percent).

The total number of employees working for small businesses in 2020 was, in order of magnitude, wholesale and retail trade (1.86 million); construction (0.83 million); accommodation and food services (0.78 million) and manufacturing (0.78 million). These industries alone accounted for 55.0 percent of all jobs in small businesses in Canada. Overall, industries in the goods-producing sector accounted for 26.3 percent of total employment and 24.0 percent of employment in small businesses.

Accommodation and food services had the highest share of employees working in small businesses (1–99 employees), specifically 782,100 out of the total of 851,700 employees in the industry, or approximately 91.8 percent.

2.3 How much did employment shrink between 2019 and 2020?

In 2020, the COVID-19 pandemic posed significant challenges to the Canadian economy. The resulting economic contraction significantly impacted 2020 employment statistics. In fact, between 2019 and 2020, total net employment change in the private sector was -878,700, which corresponds to a negative annual growth rate of −7.2 percent (Table 7). The net employment change among small businesses was −740,800, compared with −68,700 among medium-sized businesses, or an annual growth rate of −8.8 percent and −2.8 percent, respectively. Consequently, the contribution to net employment change by small businesses was 84.3 percent and 7.8 percent by medium-sized businesses. SMEs were responsible for 92.1 percent of net employment change over the last year (Figure 9).

Between 2019 and 2020, private sector employment decreased in all the provinces. Among small businesses, employment decreased in all provinces, with Prince Edward Island posting the highest negative annual growth (−12.8 percent). Employment decreased across all size categories in six provinces: Nova Scotia, New Brunswick, Ontario, Manitoba, Alberta and British Columbia. British Columbia posted the greatest negative annual growth (−10.4 percent) in private sector employment over the last year.

Over the 201920 period, 82.3 percent of total net employment change was attributable to businesses in the services-producing sector; while 17.7 percent was attributable to businesses in the goods-producing sector (Table 8).

The most significant net employment changes observed in the services-producing sector were the decreases in accommodation and food services (−258,700) and in wholesale and retail trade (−141,600). These two industries alone accounted for 55.3 percent of the net change in the services-producing sector. The contribution to net employment change by SMEs in these two industries was 99.0 percent for the accommodation and food services sector and 98.2 percent for wholesale and retail trade.

The manufacturing, the construction and the mining, quarrying, and oil and gas extraction industries saw the most significant negative net employment changes in the goods-producing sector: −75,200, −46,800 and −22,200 jobs, respectively.

3. Growth

3.1 What is the proportion of high-growth firms?

Firms that achieve high growth in a short period of time tend to make a large contribution in terms of employment and wealth creation. Based upon a 2017 study,^{Footnote 14} high-growth firms^{Footnote 15} contributed to 41 percent of the total net employment change between 2009 and 2012. Although policy-makers tend to associate high-growth firms with innovative high-tech firms, the reality, as discussed below, is that these firms are found across all industrial sectors.

Figure 10 presents percentages of high-growth firms across different industries, between 2015 and 2018, based upon revenue and employment. As shown, there are high-growth firms in all industries. In the goods-producing sector, the largest share of high-growth firms, based upon revenue, is found in the following industries: mining, quarrying, and oil and gas extraction (11.3 percent); construction (10.3 percent); and manufacturing (8.0 percent). In the services-producing sector, industries with the largest share of high-growth firms are information and cultural industries (11.0 percent); professional, scientific and technical services (8.4 percent); and administrative and support, waste management, and remediation services (8.3 percent). Overall, the share of high-growth firms based upon revenue is just under double the share based upon employment (5.8 percent versus 3.3 percent).

4. Export of goods

4.1 Which provinces have the highest concentrations of exporters?

Exporting is vital to Canada's economy. It is a driver of economic growth and is strongly correlated with real gross domestic product growth. Furthermore, exporting can provide a strategically important means of growing a firm by expanding its market beyond the confines of Canada's relatively small domestic market.

Exporters are found in all provinces. In 2020, out of the 48,325 establishments that exported goods, 42.6 percent were operating in Ontario (Table 9). Ontario had the highest concentration of exporters at 45.8 exporters per thousand establishments. The lowest concentration of exporters was found in the territories and Newfoundland and Labrador, at 15.7 and 17.2 exporters per thousand establishments, respectively.

In Canada, the average value of exports per establishment was $9.77 million in 2020. This includes establishments located in Newfoundland and Labrador, which had the highest average value of exports, at slightly more than $25.5 million per establishment, followed by the Territories and Alberta at $20.1 million and $18.3 million per establishment, respectively. This can probably be explained by the fact that the territories and these two provinces specialize in the exploitation of natural resources.

4.2 How do SMEs contribute to Canada's exports?

In 2020, Canada's exports of goods totaled $471.9 billion, of which 43.0 percent was attributable to SMEs (Figure 11). A total of 48,325 Canadian establishments exported goods, the vast majority of which were SMEs (97.5 percent).

While virtually all Canadian industrial sectors export goods, four in particular account for over 90 percent of the total value of goods exported in 2020 (Figure 12). Manufacturing accounted for 58.7 percent of the total value of goods exported in 2020, followed by wholesale trade (12.6 percent), management of companies and enterprises (12.0 percent) and mining, quarrying, and oil and gas extraction (9.1 percent).

The contribution of SMEs to exports of goods varies by industrial sector (Figure 13). In 2020, the contribution of SMEs to the total value of goods exported was 75.0 percent in wholesale trade and 63.7 percent in "other industries." At the other end of the scale, the contribution of SMEs to the value of exports of goods was only 7.5 percent in management of companies and enterprises and 40.2 percent in manufacturing.

4.3 What are Canada's main export destinations?

The COVID-19 pandemic has posed important challenges to exporting for Canadian businesses. In fact, between 2019 and 2020, the value of goods exported decreased by -11.5 percent, to almost $472 billion (Table 10). Exports to the United States, the main destination for Canadian goods exports, declined by -14.5 percent.

From 2019 to 2020, the value of exports to the United States by small businesses as a percentage of the value of total exports by small businesses decreased from 78.8 percent to 74.6 percent;

for medium-sized businesses, the decrease was from 68.7 percent to 68.2 percent. This percentage also decreased for large businesses, with exports of goods to the United States by large businesses dropping from 75.4 percent to 73.2 percent (Table 11).

Of the 20 main destinations for exports of Canadian goods in 2020, the highest contribution attributable to SMEs toward the total value of goods exported came from exports destined for the United Kingdom, the third-most significant destination, with 70.8 percent of the total value of goods exported by SMEs.

Canadian SMEs also accounted for more than 50 percent of the total value of goods exported to six other countries among the 20 main destinations: Brazil (66.3 percent); Australia (61.0 percent); Norway (56.5 percent); Indonesia (52.9 percent); Taiwan (51.1 percent) and India (50.9 percent).

In 2020, the second-most significant destination for goods produced by small businesses was China, followed by Japan. The United Kingdom and China were the second- and third-most significant destinations for medium-sized businesses, respectively.

5. Gross domestic product

5.1 How do SMEs contribute to Canada's gross domestic product?

Gross domestic product (GDP) is a key measure of economic production that can be used to compare any two industries' value added, i.e., the value that an industry, through its activities, adds to its inputs. The main advantage of the GDP concept is that it avoids double counting; hence, it is considered superior in gauging economic performance compared to, for example, revenue, number of businesses or even employment. Statistics Canada recently produced estimates of GDP generated by the private sector, by business size for the 20082018 period.^{Footnote 16}

In 2020, the COVID-19 pandemic likely significantly impacted the contributions to GDP by businesses of different sizes. However, since the most recently available data on GDP by business size are for the year 2018, these impacts are beyond the scope of this report. Based on Statistics Canada estimates, the contribution to GDP by business size varies slightly throughout the 20082018 period (Figure 14). Large firms' contribution decreased slightly between 20082018, with a more significant drop between 2014 and 2016 followed by an uptick between 20162018. In contrast, small firms' contribution trended up slightly over the 20082018 period with the more significant uptick between 20142016 followed by a decrease thereafter. Medium-sized firms' contribution to GDP trended up slightly between 2008 and 2018.

More recently, from 2014 to 2018, the average contribution of small businesses to GDP was 37.8 percent, the contribution of medium-sized businesses was 14.1 percent and the contribution of large businesses was 48.1 percent. In other words, SMEs accounted for more than 50.0 percent of the value added to the country's output.

The contribution of SMEs to GDP varied across industrial sectors (Table 12). The average contribution of SMEs to GDP over the 20142018 period was 52.3 percent in the goods-producing sector, compared with 51.8 percent in the services-producing sector.

In the goods-producing sector, the average contribution of SMEs to GDP was 92.6 percent in agriculture and 80.9 percent in construction. For the other three industries in the goods-producing sector, the average contribution of SMEs to GDP was less than 50 percent.

In the services-producing sector, the greatest contributions of SMEs to GDP were observed in the educational services (89.6 percent), health care and social assistance (85.7 percent), and other services except public administration (85.0 percent) sectors. SMEs in the information, culture and recreation (24.3 percent), finance, insurance, real estate and leasing (32.0 percent), and transportation and warehousing (41.0 percent) industries had, on average, lower contributions to GDP.