Canada is increasingly becoming a country of small entrepreneurs, says a new report from CIBC pointing to a sharp rise in the number of Canadians starting their own businesses.
The report finds that in June more than half a million Canadians said they had begun their own business over the past two years, a record number.
Perhaps most encouraging, 80 per cent of new owners say they made the decision to strike out on their own voluntarily, not because they couldn’t find a job.
That’s a welcome shift from the early 1990s and 2008, when the recession and layoffs drove more and more Canadians into involuntary self-employment.
Currently, about 15 per cent of Canada’s labour force is self-employed.
But the CIBC study, which drew its data from research commissioned from Statistics Canada, suggests the proportion will rise in the future.
Economist Benjamin Tal, who authored the paper released Tuesday, said several factors appear to be driving the trend.
Those factors include: the aging population – the over 50 crowd represents 30 per cent of all the new startups; technology like the Internet that makes the process easier; outsourcing by corporations to small firms; and the continued influx of immigrants, who represent a sizable section of the self-starters.
“I would say these trends are irreversible,” he said. “The trend suggests the growth in self-employment will be faster in the next decade than any other decade.”
Mr. Tal said older Canadians are more likely to start their own firms because they tend to have the work experience necessary; have made useful contacts during the work lives; and are more likely to have the financial means to do so.
He ventured another reason why the trend may accelerate: “Add to that a new generation of Canadians that are much more cynical about corporate culture, about pensions, and are more self-reliant,” he said.
The new entrepreneurs also tend to be predominantly male, accounting for almost 70 per cent of all startups, although female-led start-ups tend to stay in business longer on average.
Mr. Tal noted that Canada is not alone in experiencing a shift toward more self-employment from traditional work, saying a similar dynamic is occurring in the U.S. and much of Europe.
Many of the new startups will fail. Half will fail within five years. But Mr. Tal said demographic trends suggests that the country can support about 150,000 net new business – accounting for those that fall by the wayside – in the coming 10 years.
Canadians who have started new businesses in the past two years are generally more educated than the average in the population, and more educated than previous entrepreneurs.
By sectors, the number of individuals starting businesses in the educational services field has risen by 65 per cent since 2007, the fastest growth of any, followed by a 20 per cent increase in health care. Proportionally, British Columbia leads the country with startups representing 3.9 per cent of the employed population.
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