10 things you (probably) didn’t know about Canadian small businesses

This list proves how entrepreneurs are the engine of Canada’s economy

3 minutes read

Small business is big in Canada. Accounting for 99.8% of businesses in this country, businesses with fewer than 500 employees—technically known as small and medium-sized enterprises (SMEs)—are the engine of the economy and 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 probably 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 2020.

2. Most exporters are SMEs

Out of the 48,325 Canadian establishments that exported goods in 2020, the vast majority (97.5%) were SMEs. They produce 43% of the total value of Canadian exports.

3. As of 2020, SMEs are responsible for 10 million jobs in Canada.

SMEs employ 88.3% 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.” 73.9% have fewer than 10 employees.

5. Professional, scientific and technical services is the sector with the most SMEs

Professional, scientific and technical services have the most SMEs (151,407) across both goods-producing sectors and the service-producing sectors. More than 99% of businesses in this knowledge and skill-based sector have fewer than 500 employees. In other words, SMEs dominate the sector that requires a high degree of expertise and training.

6. Businesses owned equally by men and women have the highest survival rates

10 years after their creation, the survival rate for majority female-owned business lower compared to majority male-owned businesses (57.5% and 61.9% respectively). However, equally owned businesses have the highest rate at 68.6%.

7. In 2020, COVID-19 related employment shrinkages mostly affected SMEs.

SMEs were responsible for 92.1% of net employment change between 2019 and 2020, when the total net employment change in the private sector was -878,700. In short, most of the job losses caused by the pandemic occurred in small and medium-sized businesses.

8. High growth firms are not evenly distributed

These three sectors have the highest concentration of high-growth firms (a firm with at least 10 employees and an average annualized employee or revenue growth greater than 20%, over three consecutive years):

  1. Information and cultural industries
  2. Mining, quarrying, and oil and gas extraction
  3. Administrative and support, waste management and remediation services.

9. Most firms survive longer than five years

More than two-thirds (67.9%) of new businesses in Canada survive to see their fifth year of operations.

10. Goods-producers have a higher survival rate compared to services-producers.

10 years after opening, about half (49.6%) of good-producing businesses are still in operation, compared to 44.6% of services-producing businesses.

Source: Innovation, Science and Economic Development Canada.

Discover more research and analysis on issues impacting SMEs and the Canadian economy.