Canadian Small Businesses in 2022: Facts and Trends
Canadians love small businesses – and with good reason. The numbers speak for themselves, as of late 2021, about?98.1%?of Canadian businesses were considered small (i.e., fewer than 100 employees). They employed?10.3 million?individuals in total, accounting for?63.8%?of the Canadian labor force, and produced?over 40%?of the total value of Canadian exports. There’s no doubt that small businesses play a critical and vital role in the daily lives of all Canadians.
Why Small Businesses are Important in Canada
Aside from contributing more than?40%?of Canada’s overall?Gross Domestic Product,?small businesses in Canada help create jobs, improve local communities and fuel innovation.
Creating Jobs
Think back to your first job. It was most likely working for a small business, wasn’t it? While Canadians may think most job opportunities come from large companies, that couldn’t be further from the truth. In fact, small businesses are responsible for creating?150,000 jobs per year. That said, this is largely dependent on how the economy is doing. When GDP is trending upwards, people are more encouraged to start or to expand their small business, which directly increases hiring.
Supporting Local Communities
When Canadians describe Canada, the word ‘’community’’ often comes to mind. Canadian Small businesses help foster local economies by keeping money close to home, supporting charitable initiatives, and volunteering within their communities. Therefore, when buying from a small business, people are directly contributing to their community. Small businesses also play a key role in creating a unique community identity, helping reflect the personality of a city or town. At the end of the day, small business owners are often regarded as community leaders, coaches and change makers.
Fueling Innovation
Some of the greatest Canadian innovations of today came from small businesses. Think of large companies like Shopify, Tim Horton’s, Lululemon, etc. They all came from an extremely competitive business environment and were willing to take risks. The pandemic showed us just how resilient small businesses truly are and proved they’re the ones driving innovation and growth to create new companies and industries in Canada.
Small Business Outlook for 2022
Leading up to 2022, Canadian small businesses were concentrated in the following industries:
Similarly, industries with the most employees were retail, accommodation, food services and construction. The pandemic was especially damaging for service-based industries, given their vulnerability to mandated closures and restrictions.
Fortunately, these industries are recovering, and their outlook is looking better. According to?TD’s small business financial report,?financial vulnerability was steadily declining until the end of 2021 for hardest-hit industries. That said, we’re not out of the woods yet. In the first quarter of 2022, Statistic Canada conducted a?survey?on business conditions to better understand the current environment businesses are operating in and their expectations. Based on the results of this?survey, small businesses had a more pessimistic few of their outlook for the next 12 months, when compared to larger businesses. As it relates to profitability and sales,?35.6%?of businesses with 1 to 19 employees and?28.9%?of businesses with 20 to 99 employees were expected to see a decrease in the first quarter of 2022. With these numbers in mind, some industries may continue to struggle in the short term.
领英推荐
Current Challenges for Canadian Small Businesses
Small businesses are still licking their wounds from the pandemic and they continue to face challenges, such as outstanding debt, supply chain issues and hiring.
Outstanding Debt
As the pandemic lingered for two years, small businesses sought external financing in order to survive. First, they looked at the government for financial support and relief?(CEBA Program).?But, with restrictions now lifted and the economy running hot, the government had to tighten its fiscal spending. As a result, some small businesses have now reached a point where they can’t take on more debt and are running out of liquid assets to operate. According to?Statistics Canada’s 2022 first quarter report,?smaller businesses were more likely to report this being the case compared to their larger counterparts. In fact,?CFIB?(a non-profit representing 100,000 SMBs in Canada) members took on an average of $160,000 in pandemic-related debt, with about $60,000 of that coming from federal loan programs.
Supply Chain Issues
As illustrated in a?CFIB infographic,?a concerning?89%?of small businesses reported being impacted by supply chain issues in early 2022. These issues include increased prices of goods & services, delays in shipments and increased costs of shipping. Sectors such as construction, manufacturing, wholesale and retail were among the industries most impacted. Overall,?30%?of small business owners reported seeing their business costs increase by more than?20%.?Experts predict that supply chain problems are here to stay for the next three to five years and that businesses need to adapt for the foreseeable future.
Labor Shortages
Although we’ve seen record low levels of unemployment in Canada, small business sectors such as accommodation, restaurants and construction continue to struggle with?labor shortages.?To add fuel to the fire, the accommodation and food services sector are expected to see a spike in the number of vacant positions. That said, labor shortages are expected to impact larger businesses more than smaller ones. Among businesses expecting labor shortages,?more than half reported?that recruiting and retaining staff were also a challenge. To face these labor obstacles, small businesses are beginning to rely on their employees to put in more working hours.
Canadian Small Business Financing Resources?
Access to liquidity will be important for small businesses as they continue to face dire circumstances moving into the end of 2022. The government of Canada offers a variety of grants and loans which you may be eligible for. Visit their?official website?for any small business-related information. For example, if you lack the necessary funds to finance your digital transformation, the?Canada Digital Adoption Program?may have you covered. This program was announced in the 2021 budget plan and is positioned to help small business modernize their business operations.
If your business isn’t eligible for the grants or you’re looking to weigh in your options,?OnDeck Canada?can offer you a wide variety of lending options with both flexible or fixed repayment options such as?Term Loans?and?Flex Funds.?Find out how much your small business qualifies for with our streamlined?application process.
OnDeck Canada has also covered various topics such as?building resilient supply chains?and?recruiting tips?to help small business owners navigate current economic challenges. Visit our?resources page?for more information!
Bottom Line
It’s no surprise, small businesses were hit hard by the pandemic and continue to bear scars. While some challenges were erased as pandemic restrictions eased – outstanding debt, supply chain issues and labor shortages have remained. As a result, more than half of Canadian small businesses have yet to return to?normal revenue levels.?However, some small businesses have come out stronger due to less competition. We’re seeing indicators of financial well-being improving and new opportunities surfacing as consumer demand changes as well. Canadians also feel very strongly about supporting their local businesses and communities. In an RBC poll conducted by Ipsos Reid,?70% of Canadians?plan on spending more at local small businesses moving forward. One thing remains certain in all this, small businesses are resilient and won’t go down without a fight.