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Key Small Business Statistics - July 2006
How many businesses are there in Canada?
The Business Register of Statistics Canada maintains a count of business establishments1 and publishes results twice a year. Some business establishments can belong to the same company and each company owns at least one business establishment. For an individual business establishment to be included in Statistics Canada's Business Register, the company to which it belongs must meet at least one of the following minimum criteria: have at least one paid employee (with payroll deductions remitted to the Canada Revenue Agency — CRA), or have annual sales revenues of $30 000, or be incorporated and have filed a federal corporate income tax return at least once in the previous three years.
As of June 2005, there were more than 2.2 million business establishments2 in Canada, as shown in Table 1. About half of all business establishments are called "employer businesses," because they maintain a payroll of at least one person (possibly the owner). The other half are classified as "indeterminate" because they do not have any employees registered with the CRA. Such businesses may indeed have no workforce (they may be simply paper entities that nonetheless meet one of the criteria for being recognized as a business establishment), or they may have contract workers, family members and/or only the owners working for them. The "indeterminate" category was created because information about their workforce is not available.
Approximately 58 percent of all business establishments in Canada are located in Ontario and Quebec. Virtually all the rest are divided up between the western provinces (36 percent) and the Atlantic provinces (6 percent). The Northwest Territories, the Yukon and Nunavut only represent 0.3 percent of Canada's businesses.
Relative to population, the western provinces, the Yukon and Prince Edward Island have more business establishments than elsewhere, with the highest rates in Saskatchewan and Alberta at 96.1 and 93.7 per 1000 population respectively. Nunavut, Newfoundland and Labrador, Nova Scotia and New Brunswick have the lowest ratios of business establishments per 1000 population. Ontario and Quebec are below the national average of 69.9, with 66.9 and 61.5 business establishments per 1000 people respectively.
In terms of Gross Domestic Product (GDP) per business establishment by province, the Northwest Territories shows the highest ratio at $1 552 000 per establishment. (This is likely due, in part, to the low number of establishments per 1000 residents and therefore its GDP is spread over fewer establishments.) More broadly, there is a noticeable negative relationship between the number of establishments per 1000 inhabitants and the per-establishment GDP in the sense that a higher number of establishments per 1000 population corresponds to a lower per-establishment GDP. Alberta is an exception to this rule with a relatively high GDP per establishment and a high number of establishments per 1000 residents.
Of the 1 048 286 employer businesses, slightly fewer than 3000 or about 0.3 percent have more than 500 employees. The vast majority of employer businesses (98 percent) have fewer than 100 employees, nearly 74 percent have fewer than 10 and 57 percent have only 1 to 4 employees (see Table 2).
About one quarter of all business establishments (indeterminate and employer businesses alike) produce goods, while the remainder provide services. Small firms (those with fewer than 100 employees) make up 97 percent of goods-producing employer businesses and 98 percent of all service-producing employer businesses (Table 2 and Figure 1). Using an alternative definition of small businesses in the serviceproducing sector that defines small businesses as those with fewer than 50 employees, small firms account for 95 percent of all service-producing employer firms.
Figure 1: Distribution of Business Establishments in the Goods-Producing and Service-Producing Sectors by Firm Size (Number of Employees), June 2005
Source: Statistics Canada, Business Register, June 2005.
Note 1: By conventional Statistics Canada definition, the goods-producing sector consists of North American Industry Classification System (NAICS) codes 11 to 31–33, while NAICS codes 41 to 91 define the service-producing sector.
Note 2: The "indeterminate" category consists of incorporated or unincorporated businesses that do not have a Canada Revenue Agency payroll deductions account. The workforce of such businesses may consist of contract workers, family members and/or owners.
Table 3 shows the distribution of employer businesses by size of business establishment in each province and territory. Generally speaking, the distribution in the provinces is similar to the national average. However, there is some variation among the provinces and territories: for example, there is a higher percentage of micro-enterprises (1 to 4 employees) in Quebec (62 percent) and Newfoundland and Labrador (60 percent) than in Ontario (53 percent), Manitoba (52 percent) or the territories (from 29 percent to 51 percent).
Where are the self-employed in this count of businesses?
The designation "self-employed" is most commonly used as defined in Statistics Canada's Labour Force Survey, which is a count of the labour force (see Who is self-employed?). This section, on the other hand, provides counts of business establishments. It is easy to confuse the two because of the common perception that self-employed workers operate their own businesses. While this is generally true, the two are distinct counts. These counts relate as follows. First, a business owned by a person who is identified as self-employed and who is on the payroll would be captured as an "employer business" in the appropriate size category (Tables 1 to 3). Likewise, the business of a self-employed owner who is not on the payroll and has nobody else on the payroll would be counted among the 1.2 million "indeterminate" business establishments (Tables 1 and 2). On the other hand, while many self-employed persons operate a business, many others do not, at least not in the sense of how the term "business" is defined by the Business Register (see How many businesses are there in Canada?), and thus would not be included in the count of business establishments. It is not known to what degree there is a correspondence between the 2.2 million "business establishments" in Canada and the estimated 2.5 million persons in the population who identify themselves as "self-employed." For more on self-employment, see also How many people are self-employed? For more on small business employment based on payroll data, see How many people work for small businesses?
1. Statistics Canada uses four standard statistical business units for purposes of compiling statistics. Establishments are the smallest unit/grouping for which data are published. Establishments must:
a) produce a homogeneous set of goods or services;
b) not cross provincial boundaries; and
c) provide data on the value of output together with the cost of principal intermediate inputs used, along with the cost and quantity of labour resources used to produce the output.
For example, a business unit of a larger enterprise that provides independent accounting information to the government on sales taxes and payroll deductions would be recognized as an individual business establishment.
2. This number includes both commercial and non-commercial business establishments.
