Blog: Trends in Canada’s Entrepreneurial Landscape

January 1st, 2015 entrepreneurial trends

What do the Blackberry, snow blowers, Trivial Pursuit, pet insurance, insulin, instant replay, online auctions and five-pin bowling all have in common? They are all examples of Canadians taking advantage of entrepreneurial opportunities with innovation.

As the management scholar Peter Drucker said, “Innovation is the specific instrument of entrepreneurship. It is the act that endows resources with a new capacity to create wealth.” Or in other words, the essence of entrepreneurship is the act of creating something new – innovating.

As we know, entrepreneurial activity is not just good for entrepreneurs themselves – it benefits all Canadians. It is a powerful force that not only drives innovation, but productivity, job creation and economic growth. And as a result, countries with a high level of entrepreneurial activity tend to be better off economically.

So what does the Canadian entrepreneurial landscape look like today?

To begin with, one in 15 working Canadians owns an incorporated business. That is twice as many as in the United States.

Over one third of Canadian small and medium-sized enterprises (SMEs) are owned entirely by women and that increases to 47% when partial ownership is included.

Speaking of female entrepreneurs, according to Statistics Canada, we are on the move:

  • In Canada, when a woman decides to start a business, she tends to stay in business longer – survival rates are higher.
  • The proportion of women-owned businesses that plan to expand their business is generally higher than men.
  • Approximately 51% of Aboriginal-owned SMEs belong partly or wholly to women.
  • Among established businesses, the percentage of female entrepreneurs rose from 27% in the early ‘90s to 33% in 2012.
  • In terms of employee growth rates, majority female-owned firms with growth intentions are significantly more active in hiring new employees than majority male-owned firms.
  • Majority women-owned SMEs represent over $117 billion per annum of economic activity in Canada.

Canadian SME owners are becoming older and need to start planning for succession. We will soon see an increased number of transfers of businesses to next-generation family members, existing management or to outside buyers.

There has been an increase in the age and the experience of Canadian SME owners, which is reflective of the aging Canadian population as a whole. While succession planning is an issue for many business owners, studies and our experience indicate that the majority do not have a plan in place. Only 10 percent of SME owners have a formal, written succession plan; 38 percent have an informal, unwritten plan and the remaining 52 percent do not have any succession plan at all.

Canadian SME owners have become more diverse, reflecting the greater diversity in the Canadian population. Aboriginal persons, people from visible minorities and recent immigrants have become the majority owners of a larger proportion (17%) of Canadian SMEs and this trend is also reflected in the increase in the percentage of business owners whose first language is not English or French (15%).

Most SME owners started their business from scratch. Three-quarters of Canadian SME owners started their own business, rather than acquiring it from a family member or from someone outside their family. However, having parents who are self-employed can help provide the financial capital to start a business and a family with an entrepreneurial background also helps provide the business skills that are applicable across any industry.

Canada’s Areas of Strength

Pool of entrepreneurial ventures. The birth rate of new firms with paid employees is higher than the death rate, which means that the pool of businesses with entrepreneurial potential is being replenished regularly.

Sustainability of entrepreneurial ventures. New firms in Canada have high survival rates at both the one-year and the five-year point. This implies that the businesses created by Canadians have desirable characteristics that enable them to attain and maintain a competitive advantage in their markets. What characteristics help businesses in Canada to survive the early years? Market orientation, innovativeness, productivity, operational capability and advantageous cost structures.

High-growth rates for manufacturers. The growth rates achieved by Canadian manufacturers rank among the best. These indicators of growth suggest that Canadian manufacturers are developing innovative products, processes and/or markets.

Canada’s Areas of Improvement

Growth of service firms. Canada generates a lower proportion of high-growth businesses in the service sectors than do most comparable countries.

Exporting. The percentage of exports accounted for by Canadian SMEs is lower than most European nations and the U.S. Given the small Canadian domestic market size and the general increasing globalization of business, this should be a priority.

For more information on the services that Crowe MacKay can provide your new or established entrepreneurial venture, contact your local office.

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