Business growth has been a subject of interest for researchers, policymakers and government for decades, and small businesses, which make up 98% of firms in Canada, have been at the centre of these discussions. But recently, the focus has shifted from startups to established businesses that are positioned to become high-growth firms (have an average annual employee growth of more than 20% over three years).
In its recent report, Scaling Success, the Canadian Chamber of Commerce’s Business Data Lab identified the small businesses that are positioned for high growth, the pathways they use to scale and the barriers that may prevent them from achieving their potential.
Characteristics of the High-Growth Trajectory
The common characteristics for small businesses that are most likely to expect high growth include:
- Have 5–19 employees
- Have operated between 3–10 years
- Are located in Ontario and Quebec
- Are based in manufacturing, accommodation and food services, or professional services
- Are owned by immigrants or visible minorities
- Are exporters
What Small Business Need to Grow
Among the most crucial factors for growth are:
Access to Financing
Financing is often the make-or-break factor for small businesses aiming to scale as they need more capital to support expansion, hire additional staff and invest in new technologies.
While there are various financing options available, many small firms face significant hurdles in securing the funds. This challenge is especially acute for younger firms and those owned by underrepresented groups who may face higher borrowing costs and/or more restrictive lending conditions. As a result, many small businesses are turning to alternative financing sources, such as marketplace lending or government-backed loans, that provide greater flexibility but also come with higher costs.
Providing more accessible lending options and targeted government programs will be key to unlocking the growth of Canada’s small businesses.
The Ability to Export
Small businesses account for only 18% of total exports even though they make up 90% of Canadian exporters. Exporting provides a crucial pathway for small businesses to scale by expanding their market reach and increasing their revenue streams. Firms that successfully enter international markets often gain a competitive advantage, diversify their operations and increase their resilience against domestic economic fluctuations.
While digital tools like e-commerce provide opportunities for Canadian businesses to reach new global markets and customers, many small businesses still face challenges, such as understanding foreign market regulations, managing logistical complexities and securing the necessary financing to support international expansion. Programs and resources targeted at overcoming these knowledge and financing gaps can help small businesses unlock the growth potential that exporting offers and increase their share of total exports.
Technology
Businesses that invest in technology — whether to upgrade systems, automate processes or adopt digital tools — tend to improve productivity and lower costs. Nearly 28% of small businesses report that adopting new technologies improved their operations.
However, many small businesses, particularly those in traditionally non-tech industries, struggle to invest in these tools. Supporting small businesses in adopting new technologies through incentives, training and easier access to digital tools will help to ensure that they can scale, compete and grow in today’s economy.
A Supportive Policy Environment
The effectiveness and impact of the numerous federal, provincial and local programs and entities mandated to support small businesses depends on their ability to target and address clear market failures efficiently.
By simplifying financing, reducing regulatory burdens, fostering export capability and prioritizing upskilling of workers, governments can create a business environment that promotes growth.
High-growth firms, although smaller in number, have a disproportionately beneficial impact on innovation, job creation and economic expansion. Addressing their barriers to growth is essential to unlocking the full potential of Canada’s small businesses.
The full report is available for free download on the Business Data Lab’s website.
