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Four challenges facing small businesses in Canada

Four challenges facing small businesses in Canada

Robin Guy, Vice President & Deputy Leader, Government Relations, Canadian Chamber of Commerce.

It’s tough being a small business, and tougher still in the aftermath of the pandemic. Many of the challenges small businesses face — labour shortages, regulatory complexity, cybersecurity — were exacerbated in the past three years. And while we may be on the other side of the pandemic, half of small businesses are still in recovery and making below normal revenues.

Every October, Canada recognizes the economic importance of the 1.2 million small- and medium-sized enterprises (SMEs). A month-long observance is a great way of spotlighting this sector, but it’s critical we remember that small businesses face year-round challenges that require year-round support.

Given how significant they are to the Canadian economy — they contribute over half of Canada’s GDP and represent 63% of all employees — small businesses need to have the best chance at success and be rewarded for their contributions to society. We’ve identified three significant challenges facing small businesses and how a shift in government policy will help businesses overcome them to stay ahead in today’s competitive global marketplace.

Labour shortages

Most of the job losses that occurred due to the pandemic were had by SMEs. According to the Q3 Canadian Survey on Business Conditions released by the Business Data Lab , labour challenges are still a top-of-mind concern for small businesses.

Government can help meet labour market needs by increasing its collaboration with provinces and territories to upskill and reskill workers. Providing Canadians with flexible, accessible, and navigable education and skills development options will foster a culture of lifelong learning and create a talent pipeline through targeted matchmaking programs.

Regulatory complexity

More than half of small businesses are microfirms (less than four employees). Time is tight when the responsibilities of a business are shared by four people, which is why Canada’s complex regulations and tax system can feel especially burdensome on small businesses. Trying to comply with rules for interprovincial or international trade and pay the right amount of tax requires a significant amount of resources.

Easing the burden of doing business through regulatory modernization and tax reform is something we talk about a lot at the Canadian Chamber of Commerce. A comprehensive independent review of the tax system, with several specific considerations for small businesses, will make it simpler and fairer. Manageable regulations that support economic growth, consider our competitiveness in the global marketplace, and ensure alignment across provinces and with international trading partners will make it far easier for small business to get their goods and services into the hands of Canadians and global customers.

Cybersecurity and the digital transformation

In today’s digitally enabled world, small businesses can’t afford to fall behind — but they often do. Researching and implementing the technologies necessary to enable better business operations can be time consuming and expensive, and there is often hesitancy around adopting newer technology, like AI. Despite AI’s powerful potential for increasing productivity and efficiency, the adoption rate for AI among small businesses is less than 6%.

Alongside the adoption of AI and the transition to remote or hybrid work comes an increased risk of cyber-attacks. Yet only 12% of businesses across all industries are planning to adopt new security software tools in 2023. With more small businesses expected to be targeted by cyber criminals in the next two years, small businesses need to prioritize their cybersecurity. Unfortunately, security is often of secondary concern to business and there is a widespread employee-knowledge gap, even when it comes to the basics of cybersecurity. The Canadian Chamber recommends that government create an SME Cyber Defence Fund that provides SMEs with the support necessary to improve their cyber resilience and close the cybersecurity investment gap.

Access to data

The best business decisions are informed by timely, future-focused data, but getting that data isn’t easy and can be expensive. Without it though, small businesses won’t be able to operate at their maximum potential. Democratizing data will help small businesses thrive.

Four challenges facing small businesses in Canada

The Business Data Lab is a key go-to for economic trends. Through new offerings like the Business Conditions Terminal, businesses of all sizes in all regions have access to a constant flow of local, future-focused and timely insights. To continue to provide this critical data to small businesses, there must be an expansion of the Business Data Labs’ partnership with Statistics Canada.


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