Accountants work to improve entrepreneurship in Canada

A stunning drop in Canadian entrepreneurship over the past 20 years presents a new challenge for the accounting profession and other business leaders as they continue to push for improved conditions for innovation in the country.

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“Entrepreneurship is vital for a dynamic economy because it creates jobs and drives economic growth,” says Frank Magliocco, national leader for private clients at PwC Canada in Toronto. 

That decline was captured in a 2023 study conducted by the Business Development Bank of Canada (BDC), with the assistance of the Université de Montréal, which found that only 1.3 out of every 1,000 Canadians started a business in 2022, down from 3 out of 1,000 Canadians in 2000, reducing the number of self-employed across the country by about 100,000.  

Arnaud Franco, director of economic research at BDC in Montreal, says this study, entitled Entrepreneurship in Motion: Skills to Succeed in a Changing World, was based on three surveys conducted in 2023 of nearly 2,500 respondents, ranging from established entrepreneurs to university students who were considering entrepreneurship. 

“The disruptions in the economic cycles that we’ve had over the past few years have pushed people to seek more security, and generally, they’ve found the security in employment rather than in entrepreneurship. It’s hard to put all of your eggs into your entrepreneurial basket and say, ‘I’m going to take the plunge anyway,’” says Franco.  

“There’s definitely a sense that getting a stable job in a company means more financial security,” he adds, noting that, as cited in the report, about one in three businesses will fail within five years of their creation, and two in three will close within 15 years. 

Layered onto that is the issue of tax compliance, which has created an administrative burden with more returns to file and more information for entrepreneurs to disclose. 

“MNP has worked to highlight concerns about the fluid nature of the current tax system and the potential negative impact on Canadian businesses and entrepreneurs, to the government,” says Glenn Fraser, senior vice-president of private enterprise at MNP LLP in Toronto. “We’ve also joined with others in the profession to advocate for both greater tax stability and to simplify some of the compliance and disclosure requirements,” adds Fraser. 

Lack of access to capital is another impediment to Canadian entrepreneurs, who are often forced to look to the U.S. for financial support, which can ultimately lead entrepreneurs to relocate their businesses, says Fraser. 

“We have seen a lot of companies saying, ‘there are government programs, but it’s so complex to navigate the system. The reporting requirements are so complex.’ I’ve been in situations where clients have just returned the money back to the government, saying, ‘I’d rather not comply. I’ll figure out how to get the capital in other areas,’” says Fraser. 

Experts cite many potential solutions to improve entrepreneurial prospects in Canada.  

Although demographics are a key factor working against entrepreneurship, with more than half of entrepreneurs in Canada currently over the age of 50 and many of those looking towards retirement, many new young immigrants to Canada are both highly educated and entrepreneurial by nature, says Franco. 

“We need to do more to encourage this new generation of entrepreneurs to take that journey,” he adds, also noting that this growth needs to be spread throughout the country, not just in the major cities with large populations but also in rural areas.  

The BDC report identified four groups of personal skill sets needed for entrepreneurial success: grit and relationship skills, marketing and finance skills, leadership and people skills, and operational administration skills. 

With respect to leadership skills, “CPAs have had a career at dealing with successful business people so they could be good mentors and provide guidance to that kind of new entrepreneur as they lead their teams,” Magliocco explains. 

Finance skills are “basically our bread and butter,” adds Magliocco, who notes that CPAs can help clients make informed decisions about business and growth for long-term success, and with respect to operational and administrative skills, assistance in streamlining processes and ensuring effective business operations.  

“I think we need to get back to that grassroots [level] in education and demonstrate that there is a career in being an entrepreneur, and it could be a very rewarding career,” says Fraser.