Small Business Profiles

1. What are the Small Business Profiles?

The Small Business Profiles are a source of detailed financial statistics relating to the small business sector in Canada. They are intended as a performance benchmarking tool to be used by small business managers and practitioners in the planning of start-up and established businesses.

2. How are they derived?

The Profiles are generated by Statistics Canada, using the Canada Customs and Revenue Agency (CRA) tax data. For the unincorporated businesses, the data from the business income statement schedules, attached to the T1 e-file tax return, are used. For the incorporated businesses operating in Canada, the balance sheet and income statements of the General Index of Financial Information (GIFI) schedules, attached to the tax return (T2), are used.

3. How do I use the Profiles?

Each profile provides the user with statistics that indicate the general performance and financial structure of all businesses within a given industry grouping at the national, regional, provincial or territorial level.

The user's first step is to identify the industry grouping most relevant for comparison and to select the profile for that industry and the geographic area desired.

Industries are defined using the North America Industry Classification System 2002 (NAICS) – Statistics Canada's standardized coding system for grouping businesses engaged in similar types of activity into non-overlapping industry categories. Profiles are available at selected levels of industrial aggregation. The most aggregate level is the 2-digit level (Sector), followed by the 3-digit level (Sub-sector), the 4-digit level (Industry group), the 5-digit level (Industries) and the 6-digit level (National industries). A more complete description of the NAICS is available in Statistics Canada Catalogue No. 12-501E.

For confidentiality reasons, a profile is made available only for each industry/geographic area combination having at least 5 records in the sample. In cases where there are less than 5 businesses in the sample, users will need to use a higher level of industry or geographic aggregation.

4. How "small" are the businesses represented in the Small Business Profiles?

Each profile is representative of all businesses operating within the specified industry and geographic area and earning between $30 thousand and $5 million in total annual revenues for the reference year. Clearly, businesses at the lower end of this revenue scale can display very different financial characteristics than businesses at the higher end. For this reason, each profile contains financial data for the whole revenue range as well as various groupings within that range.

These various groupings make up the columns on each page of a profile, with the sample of businesses being divided into three different groupings. The first grouping treats the sample of businesses as one group, the whole industry. The second grouping divides the sample into two parts, a lower half and an upper half. The third grouping divides the sample into four parts, the quartiles.

These groupings divide the industry into segments so that comparisons between businesses with different total annual revenue levels can be made. The revenue boundary for each grouping is indicated by the low and high values appearing at the top of each column. The last column shows the percentage of businesses in the sample that reported each expense item on their tax form.

5. What data items are available?

Each profile consists of three pages, one for each of the business types: unincorporated (T1), incorporated (T2) and all (T1+T2) businesses. Businesses are classified as T1 or T2 based on the type of tax return filed with CRA. Since Balance sheet and Net Profit variables are not available from the T1 tax returns, the type of information available on each page of the Profiles may slightly differ.

The Profiles include five types of information: selected expense items, financial ratios, a balance sheet and profitable vs. non-profitable businesses. A different mix of these types of information appears on each page of the Profiles, as follows.

Type of Information	Unincorporated (T1)	Incorporated (T2)	All (T1+T2)
Selected expense	Yes	Yes	Yes
Financial ratios	Yes, but 2 only	Yes, all	Yes, but 2 only
Balance sheet	No	Yes	No
Profitable vs. non-Profitable businesses	No	No	Yes

The selected expense items include total revenue, total expenses, net profit/loss and 15 or 17 individual expense items. These data are available in two formats – as a percent of total revenue or as thousands of dollars. The financial ratios are generated from the revenue, expense and balance sheet data. The full set of 12 ratios is available only for the T2 businesses, since T1 businesses are not required to submit a balance sheet to CRA. However, a subset of two ratios is available for both the T1 and T1+T2 breakdowns. The balance sheet includes total assets, total liabilities, total equity and 10 individual asset and liability items. It is only available for the T2 businesses. The profitable vs. non-profitable business comparison is only made at the all businesses (T1+T2) level. Businesses are first grouped as profitable (net profit is zero or positive) or non-profitable. The percent of businesses that are profitable, along with total revenue, total expenses and net profit/loss for both groups, can then be shown.

Definitions of all data items contained in the Profiles can be found in the Glossary.

6. For what reference years have the Profiles been published?

Profiles have been produced for reference years 1991, 1993, 1995, 1997, 2000, 2002, 2004 and 2006.

Note: The Performance Plus Application only provides data for the two latest years.

7. How reliable are the statistics that comprise the Profiles?

Derived from a sample of unincorporated businesses and a census of incorporated businesses, the Profiles are a robust and reliable information source. However, the data in the Profiles are estimates derived from a random sample of income tax forms and are, therefore, subject to non-sampling and sampling error. The quality of the estimates depends on the combined effect of these two types of error.

A) Non-sampling error

Non-sampling errors are present in data whether a sample or a complete census of the population is taken. These errors may be introduced at various stages of data processing (such as coding, data entry, editing, weighting, tabulation, etc.) and include response errors introduced by tax filers as a result of misclassifications. All efforts are undertaken to minimize non-sampling errors through edits and data analysis, but some of these errors are beyond the control of Statistics Canada. Specifically, CRA tax forms are designed for the collection of income data for tax purposes and not for statistical purposes.

A standard for income, expense and balance sheet reporting has been in place since 2000 with GIFI. Nevertheless, there is the tendency for many businesses to over-report the "other expenses" category. The data are edited to partially (but not completely) correct this problem. Because there is financial incentive to legally minimize their tax bills, businesses may defer income and expenses from one year to the next by utilizing tax rules. As a result, some statistical distortion may be present in the tax reporting of actual business operations in a given year.

B) Sampling error

Sampling error arises because observations are made only on a sample and not on the entire population. Sampling error depends on factors such as sample size, variability in the population, the sample design and the method of estimation. For sample estimation, since inference is made about the entire population based on data obtained from only a part of that population, the results are likely to be different than if a complete census was taken under the same general survey conditions. The most important feature of probability sampling is that the sampling error of an estimate can be measured from the sample itself. Indicators of sampling error have been calculated for individual statistics in the Profiles. They can be interpreted as follows:

Code	CV Range (%)	Description
A	Less than 5.01	Good
B	5.01 to 15.00	Satisfactory
C	15.01 to 33.33	Poor, use with caution
F	Greater than 33.33	Suppressed

Please note that in 2006, the standard error was used for the tables showing the percent of total revenue rather than the CV.

For more detailed information on the sampling, editing and estimation procedures, refer to Data Sources and Methods.

C) Confidentiality of business data

As required by law, Statistics Canada ensures that only aggregate data (i.e. totals and averages) that do not in any way reveal information relating to individual companies are included in the statistics that comprise the Profiles.

To prevent disclosure of individual company information, any small business profile consisting of less than five sampled businesses is not published.