10 things you (probably) didn’t know about Canadian small businesses
Small business is big in Canada. Businesses with fewer than 500 employees—technically known as small and medium-sized enterprises (SMEs)—account for 99.8% of businesses in this country. They are the engine of the economy. Their success is vital to Canada’s prosperity.
What is a SME?
SME stands for small and medium-sized enterprises, which are defined by how many paid employees they have. More specifically:
- A small business has one to 99 paid employees
- A medium-sized business has 100 to 499 paid employees
- A large business has 500 or more paid employees—these companies are not considered SMEs
Here are 10 things you didn’t know about SMEs and their impact on Canada’s economy.
1. There are over a million SMEs in Canada
There were 1.22 million SMEs in Canada as of December 2022.
2. Most exporters are SMEs
Out of the 53,327 Canadian establishments that exported goods in 2022, the vast majority (72.9%) were SMEs. They produce 40.8% of the total value of Canadian exports.
3. As of 2022, SMEs are responsible for close to 8 million jobs in Canada
SMEs employ 63.8% of Canada’s working individuals in the private labour force.
4. Over half of SMEs have fewer than four employees
More than half of Canadian businesses (55.3%) have fewer than four employees—they are known as “micro-enterprises.” 73.8% have fewer than 10 employees.
5. The professional, scientific and technical services sector has the most SMEs
Professional, scientific and technical services have the most SMEs (155,350), followed by Construction (152,864) and Retail trade (134,938). The professional, scientific and technical services sector includes businesses that rely on their employees’ skills and knowledge, rather than on equipment or materials. For example, legal services, advertising, bookkeeping, and scientific consulting services are in this sector.
6. Businesses owned equally by men and women have the highest survival rates
Ten years after their creation, the survival rate for majority female-owned businesses is lower compared to majority male-owned businesses (58.1% and 62.2% respectively). However, equally owned businesses have the highest survival rate at 68.9%.
7. High growth firms are not evenly distributed across sectors
A business with at least 10 employees and an average annualized employee or revenue growth greater than 20% over three consecutive years is considered high growth. These three sectors have the largest concentration of high-growth firms in the goods-producing sector:
- Construction
- Mining, quarrying, and oil and gas extraction
- Agriculture, forestry, fishing and hunting.
In the services-producing sector, these industries have the greater share of high-growth firms:
- Information and cultural industries
- Finance and insurance
- Professional, scientific and technical services.
8. Most firms survive to see their fifth year
More than half (58.8%) of new businesses in Canada survive to see their fifth year of operations.
9. Goods-producers have a higher survival rate compared to services-producers
Ten years after opening, about half (50.8%) of good-producing businesses are still in operation, compared to 35.2% of services-producing businesses.
10. SMEs are the backbone of the Canadian economy
SMEs are essential to Canada’s gross domestic product (GDP). From 2016 to 2020, SMEs accounted for more than 48.2% of the value added to Canada’s output.
Source: Innovation, Science and Economic Development Canada, Key Small Business Statistics 2023.
Discover more research and analysis on issues impacting SMEs and the Canadian economy.