Already more than half a million Canadians in process of starting own
business in 2012
TORONTO, Sept. 25, 2012 /CNW/ - Canadians are expected to become their
own bosses at an accelerated pace in the coming decade, with more than
half a million entrepreneurs in the process of establishing their own
business this year, finds a new report from CIBC.
"Irreversible structural forces suggest that the next decade might see
the strongest start-up activity in the Canadian economy on record,"
says Benjamin Tal, deputy chief economist at CIBC. "The gradual shift
to a strong culture of individualism and self-betterment; the role of
technology in driving the transition from boardrooms to basements; the
more global and inter-connected markets that require greater
specialization, flexibility and speed; as well as small business
friendly demographic trends are among those forces that are likely to
support a net creation of 150,000 new businesses in Canada in the
coming ten years."
The report finds a number of interesting trends among today's new
Being self-employed is a choice with only 20 per cent of new owners doing so because they couldn't find
The 50 and over age group is the fastest growing segment of new business owners accounting for nearly 30 per cent of start-ups;
The self-employed are more educated - a third have a university degree;
70 per cent of new businesses are started by men but women tend to be more successful;
Educational services (up almost 65 per cent since 2007) and health care are (up almost 20 per cent) are growing fastest:
B.C. leads the country with start-ups representing 3.9 per cent of the employed population.
Mr. Tal notes that the recent improvement in start-up activity has
occurred despite a relatively healthy labour market indicating that a
significant number of new entrepreneurs chose self-employment as a
career rather than being forced to open a business due to a lack of
other employment opportunities. "We estimate that only 20 per cent of
those who started their own business in the past two years can be
considered "forced" self-employed," says Mr. Tal. "This is notably a
lower proportion than observed among those who started their business
during the jobless recovery of the mid-1990s and in the early 2000s.
With more business owners starting operations by choice, their
likelihood of success may increase."
By far the fastest growing segment of the start-up market is the 50 and
over age group. This group now accounts for close to 30 per cent of the
total start-ups, more than double the rate seen in the 1990s. "The
affordability and availability of technology enables older Canadians to
provide services from home. They are also able to use their
well-developed skills and take advantage of their wide business
networks and connections more effectively."
He found that today's newly self-employed tend to be more educated that
the general population - and more educated that previous entrepreneurs.
Almost one in three of those who opened up shop in the past two years
have a university degree. That is double the rate seen in 1990 and a
full five points above the rate seen for the working population as a
"Start-up activity is still dominated by men, who now account for almost
70 per cent of total start-ups," says Mr. Tal. "In fact, the share of
start-ups run by women fell from 45 per cent in the 1990s and the early
2000s to nearly 40 per cent currently. However, there is more to the
story. Among established businesses, the percentage of female
entrepreneurs rose from 27 per cent in the early 1990s to the current
33 per cent. This suggests that when women decide to start a business,
they stay in business longer.
The fastest growing segment of the newly self-employed is educational
services (up by an annual average of almost 15 per cent since 2007).
The recent focus on health care is generating both regular employment
(total employment in the sector rose five times faster than the average
of all industries since 2007) and the creation of start-ups in the
industry, which are up almost 20 per cent over the same period.
Going forward Mr. Tal believes rapid change will define the future of
start-ups in Canada with five major forces defining the sector over the
next ten years.
Increased export orientation - Half the revenues derived by businesses 2-5 years old are coming from
outside Canada. "That is not only a record high, but also double the
share seen among businesses that have been in operation for more than
twenty years," says Mr. Tal. But globalization also means more
competition. "The implication is that in order to profit from
globalization, these small firms will have to be able to penetrate new
markets. This, in turn, is achievable only if these firms succeed in
identifying niche markets."
Increased connectivity - Technology is increasingly leading to a higher level of cooperation
between small business, self-employed and larger firms. Larger firms
are calling upon the specific expertise of smaller enterprises to
complete projects. This kind of cluster of competencies and strategic
alliances will be temporary and at the end of a particular project they
will dissolve and may not cooperate again.
Growth in outsourcing - "Canadian small businesses are in a co-evolutionary relationship with
corporate business in the economic landscape. Small businesses are
needed by large corporations to create the necessary reach and depth
into local markets as distributors and agents for products and
services," notes Mr. Tal.
Increased demand for personalized products - An aging population means growing sophistication and a rapid change
in consumer tastes. This is positive for self-employment as small scale
operations are flexible and can support increased demand for
personalized services given their ability to focus on niche markets.
Immigration - "The pace of growth in self-employment among immigrants has risen
dramatically over the past two decades," he adds. "Currently close to
20 per cent of self-employed are immigrants, more than double the rate
observed in the 1980s. Given that immigration will become an even more
significant source of labour market growth, this trend is likely to
support small business formation."
The complete CIBC World Markets report is available at: http://research.cibcwm.com/economic_public/download/if_2012-0925.pdf
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For further information:
Benjamin Tal, Deputy Chief Economist at 416-956-3698, firstname.lastname@example.org or Sean Hamilton, Director, External Communications, at (416)-304-8456 or email@example.com