Businesses in rural Canada, a 2020 profile
In 2020, the COVID-19 pandemic significantly impacted small- and medium-sized businesses across the country. The effect, however, was felt somewhat differently in rural and urban areas.
In rural areas, the number of small businesses decreased by 4.1% from 2019 to 2020, while the number of medium-sized businesses increased by 0.9% over the same period. By comparison, in urban areas, the number of small businesses declined by 4.9% over the same period, and the number of medium-sized businesses declined by 3.2%.
These results are derived from the most recent Statistics Canada Rural Canada Business Profiles, 2020 database, which provides key information on small- and medium-sized businesses in rural and urban Canada and can be used to analyze how these businesses were impacted by the pandemic. The data can also be applied to analyze trends from previous years using the first release of the RCBP database, which covered the 2017-to-2019 reference period.
Urban areas lose more small- and medium-sized businesses than rural areas in 2020
In this analysis, rural areas are defined as all areas outside of census metropolitan areas and census agglomerations. In 2020, rural Canada had nearly 300,000 small businesses, representing 15.5% of all small businesses in Canada. Rural areas also had just over 7,500 medium-sized businesses, accounting for 15.1% of all businesses in that category.
From 2019 to 2020, the number of small businesses in rural areas decreased by 4.1% (312,450 to 299,530), while small urban business counts declined by 4.9% (1.7 million to 1.6 million). In both rural and urban areas, small unincorporated businesses were hit the hardest, with numbers declining by 12.0% overall (766,050 to 673,870). This observation may be partially due to the onset of pandemic-related economic restrictions that led to widespread business closures. These restrictions had a disproportionate effect on smaller businesses, including higher revenue losses and, consequently, impacting their ability to remain operational.
The results between rural and urban areas diverged even more in the case of medium-sized businesses. From 2019 to 2020, the number of medium-sized rural businesses rose by 0.9% (7,450 to 7,520), while the number of medium-sized urban businesses declined by 3.2% (43,820 to 42,420).
Counts of small businesses, all industries, Canada, by rural and urban areas and incorporation status, 2019 to 2020
Average annual revenues for small rural businesses exceed urban counterparts in 2020
In 2020, small rural businesses earned $138.4 billion, representing 17.5% of the total revenue earned by small businesses in Canada ($792.0 billion).
The average annual revenues of small businesses grew over the same period. From 2019 to 2020, the growth in average annual revenues of small rural businesses (3.6% to $462,000) outpaced that of urban counterparts (1.4% to $400,000).
Medium-sized rural businesses represented 14.6% ($69.6 billion) of the total revenues generated by medium-sized business ($477.0 billion), with average annual revenues of just under $9.3 million. Medium-sized businesses in urban areas averaged $9.6 million in annual revenues.
Average annual revenues of small businesses, Canada, all industries, by rural and urban areas, 2019 to 2020
Small rural businesses improve their profitability in 2020
The return on total assets (ROTA) ratio is a financial measure of relative profitability that compares the net income of a business to its assets. The higher the net income to assets ratio, the better the profitability relative to assets on the balance sheet. For small businesses, the RCBP database provides the ROTA ratio for incorporated businesses only.
The ROTA of small rural businesses increased from 3.3% in 2019 to 4.3% in 2020. In comparison, the ROTA of small urban businesses was greater than their rural counterparts at 6.2% but remained stable from 2019 to 2020.
In 2020, small rural businesses in British Columbia had the highest ROTA, at 7.9% (nearly double the national value of 4.3%), and the Prairie provinces had the lowest ROTA, at 1.9% (close to half the national value). Small urban businesses were generally more profitable relative to their rural equivalents, except in British Columbia, where the ROTA for urban businesses (5.6%) was 2.3 percentage points below that of rural businesses (7.9%).
The greatest increases in ROTA were observed in the Prairie provinces (0.2% to 1.9%) and in Quebec (5.1% to 6.1%) from 2019 to 2020. On the other hand, ROTA ratios declined in the Atlantic provinces (6.3% to 5.7%) and the territories (5.5% to 5.2%) over the same period.
Return on total assets of small incorporated rural businesses in 2020 by region, percent; and percentage point change from 2019
Note to readers
The Rural Canada Business Profile (RCBP) database is a dataset based on business tax returns filed with the Canada Revenue Agency. The first version of the RCBP released on March 11, 2022 provides data for the three years from 2017 to 2019. The second and current version of the RCBP, released on January 13, 2023, provides updated data for 2020. A reference year for RCBP runs from January 1 to December 31.
The RCBP defines rural areas as communities outside census metropolitan areas and census agglomerations according to Statistics Canada's Standard Geographical Classification 2016. Small businesses are defined as those businesses that have annual revenues of $30,000 to $5,000,000; this group includes incorporated and unincorporated businesses. Medium businesses are defined as those having annual revenues of $5,000,001 to $20,000,000. All medium businesses are incorporated. Businesses with higher annual revenues are not included in the RCBP.
The main variables in the RCBP database are business counts, revenue and expense breakdowns, balance sheets items, and financial ratios. Data are organized by geography (Canada, provinces and territories), rural and urban areas, industry, incorporation status, and profitable and non-profitable businesses. All regions of Canada and all industries are included except for finance and insurance and public administration (based on the North American Industry Classification System). Data are provided at the Canada, region, and province/territory levels, as well as by rural and urban areas of these geographies for small businesses, and only at Canada-level including breakdowns by rural and urban areas for medium-sized businesses.
The Rural Canada Business Profiles, 2020 database is now available.
The full article "A profile of businesses in rural Canada, 2020" is now available as part of Rural and Small Town Canada Analysis Bulletin (21-006-X).
For more information, or to enquire about the concepts, methods or data quality of this release, contact us (toll-free 1-800-263-1136; 514-283-8300; email@example.com) or Media Relations (firstname.lastname@example.org).
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