Small and medium-sized enterprises (SMEs) remain resilient and adaptable, but they are operating in an increasingly challenging environment marked by rising costs, regulatory complexity, labour shortages, and economic uncertainty. Addressing these pressures is essential, not only to support existing businesses, but also to encourage the next generation of entrepreneurs.
Canada’s SMEs have long provided stability in uncertain times, anchoring communities and driving local economies. But ongoing economic instability is making it harder for many small firms to plan, invest, and grow—discouraging others from starting up at all. Data now indicates the pool of new businesses is shrinking. Since early 2024, business exits have consistently exceeded new entries, resulting in a net loss of entrepreneurial activity.
Canada is experiencing an entrepreneurial drought—a sustained period when business exits consistently outpace new business starts, leading to a shrinking entrepreneurial base and reduced confidence in the viability of entrepreneurship.
To reverse this trend, the Canadian Federation of Independent Business (CFIB) prepared this report to outline practical recommendations aimed at strengthening entrepreneurship and fixing Canada’s shrinking business landscape.
This report identifies three priority areas for action:
- Reducing the cost of doing business - lowering the tax burden, improving access to financing, and ensuring government programs and procurement processes are accessible to small firms.
- Cutting red tape - reducing the regulatory burden, streamlining internal trade, and removing unnecessary barriers that consume time and resources that could otherwise be invested in growth.
- Responding to Canada’s evolving labour market - addressing labour shortages, protecting access to temporary foreign workers, and ensuring smooth business succession as many owners approach retirement.
By lowering barriers to entry, improving the environment for investment and expansion, and recognizing the critical role entrepreneurs play in the economy, policymakers can help ensure Canada’s small business sector continues to drive innovation, job creation, and prosperity.
Canada's Entrepreneurial Drought
Part 2: Fixing Canada’s Shrinking Business Landscape
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