A lot of people talk about Canada’s “post-pandemic recovery,” but it’s not that simple.
If you dig deeper, you’ll see small business growth isn’t all good or all bad.
Instead, businesses are being cautious, with different regions performing better than others, and many entrepreneurs are missing opportunities.
Are Small Businesses Climbing or Declining?
My honest answer is both. The Small Business Health Index stood at 97.0 in Q2 2025, marking a 1.6 percent year-over-year decline and a 2.5 percent quarterly drop. That makes five straight quarters of per-capita GDP decline. In plain English, we’re not floating—we’re slowly sinking.
And yet, small businesses remain the backbone of Canada’s economy. They make up 97.9 percent of all companies in the country and employ 68.8 percent of the private workforce, which is about 8.4 million people. These businesses are not disappearing. They’re adjusting, experimenting, and in many cases finding ways to thrive despite the drag.
Regionally, the divide is surprising. Manitoba and Saskatchewan are outperforming the rest of the country, with a rate of 102.9, largely thanks to resource and infrastructure investments. Atlantic Canada, on the other hand, experienced a 7.8 percent quarterly decline, dropping to 93.8. If you are considering expansion or a location strategy, these differences matter.
The Digital Divide
The most apparent distinction between those who are surviving and those who are struggling comes down to digital adoption. During the crisis years, 52 percent of Canadian small businesses invested in new websites. Another 40 percent built online payment systems, and 35 percent implemented more efficient work processes.
The result is clear.
The businesses that embraced digital are positioning themselves for growth. Those who ignored it are showing up in the declining health index numbers.
Digital isn’t optional anymore; it is the difference between sinking and swimming.
Where the Opportunities Are
If you want to know where the smart money is moving between 2024 and 2026, the data points to a handful of sectors with strong fundamentals.
Healthcare support services are booming, driven by Canada’s aging population.
Home care, therapy, and equipment rentals are all benefiting from demographics that are impossible to ignore: by 2030, eighteen percent of Canadians will be over 65, up from sixteen percent today.
Professional, scientific, and technical services are another growth engine. This sector alone accounted for over 84 percent of net employment growth in recent years.
AI consulting, cybersecurity, and digital transformation services are meeting the demand of both government and corporate sectors.
Green energy and environmental services are also rising, helped by federal infrastructure spending and carbon reduction targets.
Solar installation, energy auditing, and consulting tied to sustainability are on the upswing, with Manitoba and Saskatchewan partly benefiting from resource-driven investments.
Finally, food service innovation is making a comeback, though in new forms. Traditional restaurants continue to struggle, but specialized delivery services, meal kits, and catering tailored to specific dietary needs are expanding.
What’s Falling Behind
It is equally important to be clear about the sectors that are shrinking or disappearing.
Traditional retail is contracting, with generic shops and non-specialized stores seeing steep declines. Basic business services, such as bookkeeping, simple web design, and traditional marketing, are being automated and commoditized.
Resource-dependent services tied to mining and extraction have suffered significant losses, with employment in that sector down by more than 25 percent.
Physical event services, such as weddings and conferences, have not returned to pre-2020 levels.
The realization that consumer behavior is shifting permanently toward hybrid and virtual options, and the demand simply isn’t coming back the same way.
How Consumers Are Changing
Consumer behavior toward small businesses has changed in three important ways:
- Trust has become a premium. Sixty-eight percent of Canadians now research a business online before making a purchase, compared to just thirty-four percent in 2019. Your website isn’t just a nice-to-have; it's your credential.
- Customers want to support locals but won’t give up convenience. Online ordering has become a one-click buy with quick delivery service, and contactless options straight to your door.
- Transparency matters more than ever. With inflation driving price sensitivity, consumers are willing to pay a premium, but only if the value is clear and well communicated. Businesses that can show their worth through reviews are winning customers from those that cannot.
Regional Realities
Regional health index numbers offer a roadmap for anyone planning expansion. Manitoba and Saskatchewan lead with a score of 102.9. Ontario sits at 97.5, weighed down by challenges in the automotive and manufacturing sectors, but still representing the most significant market. Atlantic Canada lags at 93.8, but opportunities exist in specialized services. British Columbia sits at 93.9, with real estate cooling but a strong technology sector holding its own.
What This Means for the Next Two Years
The businesses that will thrive in 2025 and 2026 share three key characteristics.
They serve the demographics that are growing, whether that means aging populations or digital-first consumers.
They have embraced operational efficiency, and in doing so, built resilience into their margins.
They are solving real problems created by larger trends, such as labor shortages, supply chain issues, and digital transformation.
The decline in the health index is not a death sentence. It is a market correction.
Small businesses are not vanishing, but they are splitting into two camps: those that are adapting and growing, and the ones fading into statistics.
For entrepreneurs and investors, this is not the time to retreat to safe, traditional models. It is the time to look closely at the data, find the gaps, and build businesses that serve the Canada of 2026, not the Canada of 2019.
References
BDC Canadian Small Business Health Index, September 2025
Innovation, Science and Economic Development Canada – Key Small Business Statistics
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