Centre of the universe

Written by PROFIT staff

It could be more fodder for the East-West rivalry that has long shaped Canadian business, politics and the drama of the Grey Cup: a new report from BMO Nesbitt Burns suggests that small business is big business nowhere more so than in Western Canada, whose cities dominate two measures of small-business vibrancy. But Hogtown haters take note: there’s strong evidence to suggest that Toronto is the centre of Canada’s small-business universe.

Released Oct. 14, the Canada’s Small Business Juggernaut report includes small-business “intensity” rankings of Canada’s large and mid-sized cities. Topping the big-city list is Kelowna. B.C., with 39.7 small businesses per 1,000 residents. Calgary is next, with 38.9; followed by Vancouver (37.2), Edmonton (36.6), Victoria (35.0) and St. John’s, Nfld. (32.9). The mid-sized cities are led by Fort St. John, B.C. (71.2), Lloydminster, which straddles the Alberta-Saskatchewan border (69.0) and Canmore, Alta. (57.9). No eastern town cracks the top 10.

But the East’s small-business sector isn’t exactly freezing in the dark. Four of the top 10 big cities for small-business growth are in Ontario; five if you include Ottawa-Gatineau. Toronto places first among large urban centres, with a 15.1% increase in its small-business population in the five years ended June 30, 2009. Next are Guelph, Ont. (13.8%), Abbotsford, B.C. (10.2%), Vancouver (9.3%) and Oshawa, Ont. (9.1%). Statistics Canada data show that Toronto also led the way in three-year growth (11.4%) and one-year growth(1.7%) — right in the heart of the recession.

Are these the best places to do small business? Not necessarily. “There’s a 70% correlation between small-business growth and population growth,” says Sherry Cooper, chief economist at BMO Nesbitt Burns. “But the numbers don’t necessarily tell us that there’s a causal relationship.”

A more telling stat could be the percentage change in small businesses per capita, which, according to Statistics Canada data, increased in only two major cities over the past five years: Guelph, Ont. (+5.1%) and — yes — Toronto (+3.9%).

Toronto’s strong showing makes sense: the city’s fast-growing population makes for more customers for small businesses, which typically sell to their local markets; the city has all the financial and physical infrastructure that businesses of all sizes depend on; and it’s big enough to support independent retailers.

However, the rising percentage of Torontonians who run small businesses is a mixed blessing. The long decline of manufacturing and the current recession are great catalysts of startup activity, because layoff victims are either forced into self-employment to make ends meet or use their severance packages to pursue their entrepreneurial dreams.

Indeed, Toronto’s newly unemployed appear to be catching the entrepreneurial bug — whether they want to or not. “It’s been an unusually busy year,” says Katherine Roos, the manager of Enterprise Toronto, a municipal agency that provides support services to current and aspiring businessowners. “We’re still running at full speed.”

If the downturn drags on, Toronto will only tighten its grip on the title of Canada’s small-business capital. At least the Argos won’t get their hands on the Grey Cup this year.

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