What can entrepreneurs expect for 2026?

A year of resilience and transformation

Despite an uncertain economic environment, Canadian businesses remained resilient in 2025. According to our estimates, Canadian real GDP growth remained positive at 1.2% for the year; buoyed in large part by steady household consumption and a stable employment market.

Looking ahead to 2026, the Canadian economy is showing signs of cautious optimism, but global uncertainty and domestic challenges will continue to shape the business landscape. Overall, we expect the Canadian economy to grow at a slightly slower pace of 1% for the year.

This forecast is based on current conditions and could be revised upward if an agreement is reached with the United States. They could also be revised downward if new trade barriers are erected.

The Canadian economy continues to operate in a fragile global environment dominated by uncertainty with our two main trading partners: China and the United States. As a major producer of natural resources and an open economy, trade uncertainty and anticipated slowdowns in these major economies will negatively impact Canada’s growth.

On the domestic front, household consumption accounts for approximately 60% of GDP, year in, year out. It’s particularly important in a context of slowing global growth, as higher consumption positively impacts business investment.

While the rate cuts that started in 2024 cannot offset the effects of trade tensions, they can help ease pressure on consumers and businesses. This will help consumption remain positive, but, hampered by weak population growth and lower confidence levels than in recent years, this momentum will be limited.

With a slower economic growth, this outlook remains challenging for many businesses. Margins remain narrow and operational optimization will remain key amid persistent economic uncertainty and trade-related pressures.

How to start 2026 on the right foot?

Manage your finances tightly

In a low-growth environment, Canadian businesses will need to carefully manage their margins to stay healthy. Operating costs are continuing to rise, making improving productivity a key priority.

Evaluate the overall health of your business

Knowing your strengths and weaknesses is key to building resilience. To help you, we’ve create a free business health assessment for entrepreneurs. Try it now to find rapid improvements and optimize how you manage your business.

Keep an eye out on a shifting Canadian economy

The Canadian economy is undergoing significant shift that will create opportunities for entrepreneurs.

The Canadian government is making efforts to fast-track projects of national interests that will create new opportunities for local businesses. These include important infrastructure and energy projects.

Increased electricity demand is another area of opportunity. Utility companies are in the process of launching projects to transport electricity, power data centres and to support the development of AI. Canadian companies will be well-positioned to become part of their supply chains.

Finally, the defence sector is expected to expand in 2026 and beyond. Companies that can establish themselves in the national supply chain for the defence sector stand to gain from these investments.

Productivity will remain key

With positive but modest economic growth forecasted for 2026, entrepreneurs find themselves caught between a rock and a hard place: They must absorb cost increases while remaining competitive on price.

Unfortunately, many businesses are adopting a “wait and see” attitude in this tough environment. But while you can’t control what happens outside your business, there is a lot you can change inside your business to boost your margins and make sure you keep up with competition.

The first place to start is with waste reduction. What is waste? Waste can be found in every business function.

It can be waste in operations:

• travel
• poor quality overproduction

And it can be waste in processes:

• double entry
• meetings that could have been emails
• lack of training

Reducing waste will lead to higher profitability, sales growth, better customer experience and even speed to market.

Clarifying processes

Another area of focus should be establishing clear and shared processes. Everyone must understand their role and impact. You need to know who does what, when and how. It can be documented and written down, but it doesn’t have to. What matters is clarity. Our experience with business owners is that when processes are clearly established, important efficiencies can be achieved, which shows up on the bottom line.

Investing to become more efficient

Technology is one of your most powerful allies in optimizing your business and reducing costs.

It can be as simple as getting your business out of spreadsheets, getting rid of paper and manual data-entry, or using an online accounting system. Or you can use chatbots for routine customer service questions.

We also see situations where a business bought a software a few years ago, but they haven’t been using it to its full potential. It’s easy to go back to it and try to use those assets to their full potential.

There are also more complex solutions—from sorting and assembly lines to CNC machines. Robotics and automation are more accessible than you think and can drastically increase productivity and accuracy while freeing your people for more interesting work.

And let’s not forget AI tools to help with general tasks. AI isn’t a magic solution, but it has significant benefits that are available now. One way to think about it is that you are giving every employee an intern. Think about the things you would ask an intern to do:

• Write documents (emails, job postings, procedures)
• Automatically respond to your customers with chatbots
• Automate invoice processing

If everyone learns to use it and has a small productivity increase, then the company as a whole can become more productive and profitable.

If you need more advanced function, many existing software are now embedding AI capabilities. Your existing software may have capabilities you don’t know about.

Not every company can take on large projects with AI. But if you have a complex problem to solve, a lot of data and access to the right tool, AI could be a solution.

How to start 2026 on the right foot?

Take advantage of the new capital cost deductions

The 2025 federal budget announced a "Productivity Super-Deduction,” which will allow for accelerated depreciation (full deduction in the first year) of business capital assets until 2030. This measure applies to the cost of:

• machinery and equipment for manufacturing and processing
• clean energy production or energy conservation equipment and zero-emission vehicles
• productivity-enhancing assets, such as patents, data network infrastructure, and computers
• capital expenditures for scientific research and experimental development

Tax planning is always very complicated, and this measure may not be applicable for your business, but if you are thinking about making an investment in 2026, this deduction could allow you to recoup a part of your investment much faster. We advise entrepreneurs to discuss this with your accountant or financial advisor to maximize the benefit for your business.

Dive deeper into AI

We recently launched a free online class and a dedicated program to help business owners adopt AI and improve cybersecurity in their business. When used right, AI can be a powerful productivity enabler.

Benchmark the efficiency of your business

Strong employment numbers are likely to help disposable income grow, which will help consumption rebound once consumer confidence returns. Companies that can respond quickly and cost-effectively—in other words, the most efficient companies—will benefit the most once consumption picks up.

Find out if you are one of them with our workforce efficiency comparison tool.

A wave of business transfers is coming to Canada

Growth through acquisition is a proven lever for building resilience and improving profitability in a context of modest growth. Our research shows that companies that purchase another business are more profitable than similar businesses that did not.

More than 60% of small and medium-sized enterprises are led by someone aged 50 or older. With many business owners preparing to retire and the policy rate close to 2%, the environment could be ideal for entrepreneurs that favour this strategy.

Yet buying a business is often overlooked, as many entrepreneurs have a “builder” mindset and don’t automatically think of buying another company. Others think they’re too small or that it’s too complex.

But acquisitions are not only for larger businesses. In fact, smaller business acquisitions are less complex and costly, reducing the overall risk and increasing the rate of return on investment.

This being said, economic uncertainty is complicating the dealmaking process. Buyers now have much more to consider to insulate themselves from future risks. And sellers also have more work to do to weather-proof their operations.

If you’re looking to acquire a business in this market, you can aim for a larger vendor note or implement an earn-out connected to the company’s future performance. A vendor note (also known as vendor financing) is a loan that the seller gives the buyer to help finance the transaction. Meanwhile, an earn-out is an arrangement in which a part of the purchase price is payable only after the closing and is earned if and when certain conditions are met.

Current uncertainty is certainly making it harder to predict how markets will evolve, but a well-planned acquisition can actually be a great way to find growth in a difficult market.

How to start 2026 on the right foot

Reduce risk with the right financing structure

Ownership transition is a big change for a company, and things can be a little bumpy for a while after the transaction. Both sellers and buyers have an interest in making sure the financing package is well structured to fit the business and support in the transition period.

As noted above, vendor financing is one way to build flexibility into a financing structure. Outside equity, which is when a buyer sells an ownership stake in the company to outside investors, and mezzanine financing, which is a type of unsecured financing, can also help build out flexibility.

Your financing structure should give you breathing room to navigate the period of instability after the transaction. Make sure to plan for it early on in your transition process.

Create a succession plan

We see many Canadian businesses with aging owners that have no succession plan. A typical exit takes two years to complete for an owner. Having a succession plan in place will help you determine what type of exit you want, ensure you get the best price for your business and then complete the process. Especially in a time when so many entrepreneurs are looking to exit their business, having a plan can make the difference between a successful transition and a bust.

Venture capital: Navigating caution, innovation, and liquidity shifts

The venture capital (VC) ecosystem maintained a cautious approach amidst ongoing uncertainty affecting the broader Canadian economy in 2025. Unfortunately, this uncertainty is likely to persist into 2026 as many founders and investors wait to see whether tariff exemptions under the Canada-United-States-Mexico Agreement (CUSMA) are maintained.

Much like the previous year, investors focused on fewer but larger deals, prioritizing high-quality businesses.  In a capital constrained, high-uncertainty environment, we expect this trend to continue for 2026.

AI is expected to remain in vogue as well. The thrust towards increased productivity and efficiency is continuing across the broader economy, and this could help further AI adoption. But investors may exercise caution as the threat of an AI industry bubble looms large for market participants.

Life sciences sector returns have been outperforming those of the information and communication technology (ICT) and energy and clean technology (ECT) sectors. Persistent funding gaps at the seed and later stages have been a challenge for the sector, which has been identified as one of the priority areas in the Venture and Growth Catalyst Initiative announced in Budget 2025. The additional investment could help mitigate those funding gaps.

With regard to exit activity, the drought in initial public offerings (IPO) persisted throughout 2025, while mergers and acquisitions remained slow. As companies are staying private for longer periods, alternative sources of liquidity have started to emerge. The rapid growth in the secondaries market is a prime example. We expect demand for secondaries to stay strong as investors continue to look for liquidity opportunities in the coming year.

Lower interest rates, currently standing at 2.25% in Canada, could have a positive impact on the ecosystem. The biggest beneficiary up to now has been the private equity sector, which has been in a rebound since 2024. The positive momentum is anticipated to continue as interest rates remain relatively low.

A growing focus on sovereignty and national security

Geopolitical uncertainty and national security will have an impact on the Canadian VC ecosystem for 2026.

The government has allocated 6.6 billion dollars to the Defence Industrial Strategy to improve access to capital, drive research and innovation, bolster domestic supply chains and grow critical resource stockpiles. This approach will encourage dual-use innovation, fostering technologies that serve both civilian and defense sectors. Advanced capabilities in AI, cybersecurity, quantum computing, human-machine integration and advanced materials are anticipated to be increasingly sought after for optimizing defense operations.

The Canadian VC ecosystem continues to be dependent on foreign capital, especially at the later stages. Trade tensions are increasing the risks of pull back for these investments into the Canadian market. In this context, it’s important that we work with partners to alleviate the dependency and improve access to capital from domestic sources.

How to start 2026 on the right foot

• Budget 2025 included reforms to the Scientific Research and Experimental Development (SR&ED) tax credit program. These changes could have an impact on early-stage start-ups. It could be a good idea to discuss these changes with your accountant and advisors to understand how they will impact your business.
• Streamlined operations and efficient processes remain key to success in a relatively capital constrained environment. Focusing on smart cash management and sound business practices is just as important as delivering on your roadmap, especially for companies that need to navigate a longer fundraising cycle.