Small to medium sized enterprises (SMEs) are found throughout the Canadian economy and are important contributors in economic growth and job creation. The aging of the Canadian population, business owners in particular, combined with a lack of succession planning throughout SMEs will have a negative effect on the Canadian economy in the near future.
According to Statistics Canada, Business Register in December 2011, 98.1% of all Canadian businesses are small enterprises and an additional 1.7% are medium sized enterprises. Small enterprises are defined as enterprises that employ 1-99 employees and medium enterprises employ between 100-499 employees.
There are almost 10.8M Canadians employed in the private sector in 2011 according to SEPH (Statistics Canada’s Survey of Employment, Payroll and Hours) data. Of those employed in this sector, 47.8% are employed by small businesses with another 15.9% employed by medium sized businesses. Considering, the remaining 36.3% of those employed in the Canadian private sector are employed by large enterprises, it can be stated that the majority of the Canadian workforce is employed by a small to medium sized business.
SMEs are an integral part of the Canadian economy and support is in the form of gross domestic product, job creation and exports. As stated in Industry Canada’s June 2010 published report Key Small Business Statistics,
SMEs contribute just over 40.7% to Canada’s Gross Domestic Product
SMEs created 53.9% of all new jobs in the private sector between 2001 and 2011
SMEs account for 96.7% of all Canadian exporters in 2010
SME contributed $129 Billion in exports accounting for 42% of the total Canadian export value in 2010
In Canada, SMEs are shown to have a declining survival rate in Industry Canada’s June 2010 published report Key Small Business Statistics. Based on small and medium sized businesses with fewer than 250 employees that entered the market in 2005, 85% stayed in business 1 full year, 70% stayed in business for 2 years, 62% stayed in business for 3 years and only 51% stayed in business for 5 years.
Compounding this issue is that the same report also shows that there is a net trending decline in the amount of entrants into the market/exits out of the market from 2002 – 2008. This statistic points out that the overall amount of SMEs is declining in the Canadian economy. With declines in the overall SMEs come declines in contributions to Canada’s gross domestic product, job creation and exports. These declines have a negative effect on the Canadian economy.