For example, a study by the Canadian Federation of Independent Business indicates that 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. Over the period to , aboriginal persons, people from visible minorities and recent immigrants have become the majority owners of a larger proportion of Canadian SMEs , as shown in Table 9.
This trend is also reflected in the increase in the percentage of business owners whose first language is not English or French. However, there has been a decrease in the proportion of Canadian SMEs majority-owned by a person with a disability over this three-year period. Canadian SME owners with larger businesses tend to be wealthier.
Table 10 shows, for five different categories of firm size, the proportion of SMEs owners in each net worth category, in Three-quarters of Canadian SME owners started their business from scratch, rather than acquiring it from a family member or from someone outside their family. As Table 11 indicates, this proportion has changed little between and However, although fewer than 10 percent of business owners acquired the business from a family member, past research has found a strong family influence on self-employment.
Having parents who are self-employed can provide financial capital to start a business, but more significantly, such a family background provides business skills that are important even when the business is in a different industry than that of the parents. This report provides an optimistic portrait of the state of entrepreneurship in Canada. This final section summarizes its findings in terms of areas of strength and areas for improvement, comments on how and why this largely positive assessment might differ from those that have been more negative, and identifies some remaining questions that could not be addressed here because the relevant data were not available.
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. Canada compares well in this regard with virtually every country examined here.
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.
Without further study we cannot specify exactly what characteristics help businesses in Canada to survive the early years, but they are likely to include market orientation, innovativeness, productivity, operational capability and advantageous cost structures.
The growth rates and gazelle rates achieved by Canadian manufacturers rank among the best of the countries examined for this report.
Canada generates a lower proportion of high-growth and gazelle businesses in the service sectors than do most of the comparison countries considered here. It is beyond the scope of this report to determine why Canada's service sector performs relatively more weakly than our manufacturing sector, but investigating the reasons underlying this relative weakness is a priority for further study, given the increasing prominence of the service sector in most economies.
The percentage of exports accounted for by Canadian SMEs is lower than in European nations examined for this report and comparable to that of the U. Investigating the reasons behind Canada's ranking in this regard is also a priority for further study, given the small Canadian domestic market size is many sectors and the general increasing globalization of business. An important aspect of further research in this area should involve the impact of trade agreements on the young and small firms.
The largely positive tone of this report differs somewhat from those implied in recent reviews of the state of Canada's competitiveness Footnote 33 and the innovativeness of Canadian firms, Footnote 34 as well as some opinions expressed in the media.
There are two key reasons for this. The indicators used here to assess our entrepreneurial performance are different than those used in other reports. The indicators chosen here reflect an emerging consensus among OECD nations as to how entrepreneurial performance should be measured. The indicators used in other recent reports draw on various traditional measures of innovation and national productivity or resources that look at inputs to entrepreneurial performance rather than actual entrepreneurial achievements.
While these indicators are useful, it is important that interpretations of performance, which are based on inputs, not lead to an unbalanced account of Canada's entrepreneurial strengths. Some negative assessments of entrepreneurship in Canada are based on solicited opinions about Canada's "entrepreneurial culture.
However, "entrepreneurial culture" is a term that bears close scrutiny because it is ill-defined. Sometimes it refers to entrepreneurial skills, and these are possible to improve through education. Sometimes it refers to the availability of start-up funds, and these are possible to provide through specialized financial institutions. However, such efforts are primarily directed at increasing the competencies and financial strength of individuals who already wish to become or already are entrepreneurs.
Some countries have tried to increase the number of entrepreneurs in a society by changing the entrepreneurial mindset. This notion is more tenuous for two reasons:. Nevertheless government can still play a role by reducing barriers, improving the reward of entrepreneurship through tax system, and providing access to resources such as better information, entrepreneurship education and entrepreneurship centres. The task of policy makers is to set the rules of the game so that productive entrepreneurship is the rational and informed choice for individuals with entrepreneurial talent.
In addition to the areas for further study identified in Section 7. Entrepreneurs exist everywhere and are diverse. There are entrepreneurs in multinational corporations and small, local businesses; among immigrant and fifth generation Canadian families; and in rural and urban communities. Some entrepreneurs are serial entrepreneurs, starting and selling multiple businesses, while others start a single business that might last multiple generations.
We simply do not have the data today to allow us to document the scope and diversity of entrepreneurship everywhere in Canadian businesses and communities. Even though entrepreneurial activity occurs in Canadian firms of all sizes, the preponderance of entrepreneurial-related data have been collected on small firms, and so our empirical knowledge of Canadian entrepreneurship is limited largely to firms with fewer than employees.
Further, the focus on firm size in data collection and reporting has resulted in a neglect of firm age as a meaningful categorization, and corresponding limits to our understanding of entrepreneurial activity and performance. Starting a business is a key entrepreneurial action, and decisions in the early years of a firm's life can set it on a long-lived path, and so it would be useful to have a greater scope of data classified by firm age, in general, and about the activities and performance of young firms, in particular.
While we have some measures of firm growth and innovation, we have little data on the processes through which entrepreneurial firms grow and innovate.
For example, we cannot say whether these processes tend to be constant over time, characterized by peaks and valleys, or associated with growth periods and plateaus, and whether different trajectories are associated with greater survival prospects.
Current data allow us to describe the state of entrepreneurship in Canada, in terms of its performance. If there were greater data on the probable determinants of entrepreneurship, researchers and policy-makers would be able to investigate the links between specific determinants and specific performance outcomes. Understanding these relationships better would enable us to explain and predict entrepreneurial performance, rather than simply to describe it.
Only a limited number of international comparisons can be made at the present time because of the inconsistencies in the ways in which data are collected, recorded and disseminated across countries. While we can compare Canadian entrepreneurial performance with that of the U. The State of Entrepreneurship in Canada 1. Copyright To obtain a copy of this publication or an alternate format Braille, large print, etc.
It charts entrepreneurial activity in Canada over time and compares it with leading countries. Entrepreneurial performance indicators observed include: birth and death rates, survival rates, high-growth firms and gazelles, and research and development expenditures. Furthermore, the report provides a profile of the owners of Canadian small and medium-sized enterprises SMEs. Entrepreneurship involves the creation of something new. Type of Entrepreneurial Opportunity. New product or service. Five-pin bowling, Fuller Brush, pet insurance.
New production process. Cobalt cancer treatment, film animation techniques, instant food production. Insulin, kerosene, plastic pellets from disposable diapers. New way of organizing. Instant replay, online auctions, standard time. Examples of the determinants of entrepreneurship include: access to skilled labour; the patent system; attitudes towards risk; the banking system; consumer spending; and business taxes.
Examples of the impacts of entrepreneurship include: more highly skilled jobs; more business creation; more volunteer activity; higher standard of living; and larger tax base. Table 2: Indicators of Entrepreneurial Performance. Rationale for Using. Employer enterprise births. The proportion of all firms that are new enterprises in a given year.
Includes only firms with employees. This reflects the potential pool of new companies that might be entrepreneurial.
Businesses that have employees at start-up are the ones with the greatest growth potential. Footnote 8. Employer enterprise deaths. Economies with healthy entrepreneurial performance generate new employers at a rate that more than replaces the businesses that have disbanded. Survival rates for employer enterprises. The proportion of firms that had entered in a given year and that had not died at the end of each calculated year of business. Includes only firms with employees in the starting year.
The survival of businesses reflects their productivity, innovation and resourcefulness, as well as their adaptability to changing market conditions. High-growth firm rates based on employment or sales growth. The proportion of firms with average annual growth in either employees or in sales greater than 20 percent a year, over a three-year period.
Includes only firms with ten or more employees at the beginning of the three-year period. The high-growth rate indicates exceptional innovativeness. Firms that have higher growth rates are more beneficial to the economy in terms of job creation and general economic growth. The high growth rate indicates exceptional innovativeness at a very early age. Most private employers in Canada are actually small businesses.
This is because most Canadian businesses are small businesses. Small businesses are the corner store, family-owned restaurant or bed and breakfast. But, they are also commercial or residential trades, scientists and researchers, family physicians, dentists and more. According to the BDC, the following trends will fundamentally change the way businesses of any size work:.
In addition, BDC offers free case studies that offer insight on topics such as Canadian entrepreneurship , the Canadian workforce and more. Every day, we have the honour of working with small businesses and helping them pay their employees accurately and on time.
We also have the utmost respect for what it takes to be a small business. Formerly Wagepoint's Content Manager, Michelle enjoys simplifying complex payroll topics and creating engaging small business and partner content. When not at the keyboard, she enjoys chocolate, running and quality television not always in that order. Need a little inspiration or simply a great read? These seven books will make you think and, perhaps, take Finding the right accountant for your small business or startup is a very important decision.
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The beginning of Q1 is the one time of year where your year-to-date amounts are zero. Alberta has the highest number of early-stage entrepreneurs, while Quebec excels in entrepreneurs who create new business lines within an existing company. As data for the report was gathered in , when the economy was humming along, Josty expects data for this year should prove whether a faltering economy pushes more people toward starting businesses. Two women are entrepreneurs for every three men, a figure Josty says could be improved with policies to support female entrepreneurs.
Canada has a strong track record among G7 countries for turning its entrepreneurs into established businesses, with 9. On the other hand, a large number of entrepreneurial startups don't survive, and others sell to new owners who continue the business.
Canadian entrepreneurs set less ambitious targets than their U. Enterprises with one to four employees accounted for The professional, scientific and technical services sector had the most enterprise deaths and births, representing Among the 81, newborn enterprises with one or more employees in , 77, survived one year from to , and among the 82, newborn enterprises with one or more employees in , 67, survived two years from to In , of all active enterprises with 10 or more employees, high-growth enterprises by the number of employees accounted for 3.
The information and cultural industries sector had the highest percentage of high-growth enterprises by employment 6. British Columbia was the province with the highest percentage of high-growth enterprises by number of employees 4. In , of all active businesses with 10 or more employees, high-growth enterprises by revenue represented 5. The information and cultural industries sector had the largest percentage of high-growth enterprises by revenue British Columbia was the province with the highest percentage of high-growth enterprises by revenue 6.
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