Rural and Small Town Canada Analysis Bulletin
A profile of businesses in rural Canada, 2017 to 2019
by Mahdia Khodja, Eric Baxter and Haaris Jafri
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Highlights
- In 2019, the country’s rural areas were home to 312,500 small-sized businesses, accounting for 15.4% of Canadian small businesses, as well as to 7,500, or 14.5%, of the country’s medium-sized businesses. When seen against the backdrop of the 16.3% share of the Canadian population living in rural areas at the turn of the decade, these shares point to the relative vitality of the rural economic scene.
- Nevertheless, between 2017 and 2019, the numbers of both small and medium businesses increased at a slower rate in the country’s rural areas than in its urban areas. Rural small business counts grew 2.3% over this period, while in urban areas, small businesses counts increased 7.5%. For medium businesses, the gap in the growth rates of business counts over this period was narrower, with growths of 7.9% in rural areas and 8.5% urban areas.
- Small and medium businesses in rural areas generated, respectively, 17.1% ($139,300 million) and 14.2% ($69,300 million) of the revenues of all businesses in Canada in their respective size class in 2019.
- This analysis is based on a new Statistics Canada product, the Rural Canada Business Profiles (RCBP), released on March 11, 2022. The RCBP is a database built from business tax returns filed with the Canada Revenue Agency. With a theme of classification by rural and urban areas, the first version of the RCBP provides data for three years, starting 2017 and ending 2019. Future updates of the RCBP are expected to be produced on an annual basis. The RCBP is a analytical tool that will provide insights on trends and transformations in the rural business environment as the economy enters the post-pandemic period.
Introduction
At the turn of the decade, approximately 16.3% of Canadians, or 6.1 million people, were residing in rural communities.Note Rural areas were the workplace for 13.7% of employed Canadians, or 2.6 million persons.Note Compared to these proportions, rural areas were the location for 15.4% of all small businesses in Canada, or 312,500 small businesses, as well as 14.5% of the country’s medium size businesses, or 7,500 businesses.Note
The understanding of rural business conditions has been the focus of recent analysis.Note The pandemic may have lasting impacts on businesses as some of the trends it has set in place are reinforced going forward. An example is a shift to teleworking in many industries and occupations and the related trend of higher demand for rural residential and business properties as the need for being in proximity to employment locations situated in urban areas was reduced. This analysis can serve as a baseline for the understanding of ongoing and future trends.
This article uses data from the first release of Statistics Canada’s Rural Canada Business Profiles Database (RCBP).Note The RCBP contains data that present a profile of small and medium businesses in rural and urban Canada for the three years from 2017 to 2019. The RCBP is based on business tax returns filed with the Canada Revenue Agency. The RCBP is expected to be updated annually as new tax records become available.
Small and medium businesses in rural areas generated respectively 17.1% ($139,300 million) and 14.2% ($69,300 million) of revenues of all businesses in Canada in their respective size category in 2019.
Between 2017 and 2019, the numbers of both small and medium businesses increased at a slower rate in the country’s rural areas than its urban areas. Rural small business counts grew 2.3% over this period, while in urban areas, small businesses counts increased 7.5%. For medium businesses, the growth rates of business counts over this period were similar, with growths of 7.9% in rural areas and 8.5% urban areas.
In terms of incorporation status of rural small businesses in 2019, 36.6% were unincorporated, while 63.4% were incorporated. These proportions were relatively similar for urban small businesses (37.9% unincorporated and 62.1% incorporated).
Small business counts in rural areas grow at one-third the rate seen in urban areas from 2017 to 2019
Between 2017 and 2019, rural small business counts rose from 305,300 to 312,500, a 2.3% increase, while urban small business counts went from 1.6 million to 1.7 million, representing a 7.5% increase (Chart 1). This difference in the growth rates in counts resulted in the share of rural small business counts decreasing over this period from 16.0% to 15.4% of small businesses in Canada. This mirrored a migration of Canadians out of rural areas between 2017 and 2019, a period that saw the proportion of Canadians living in rural areas declining from 16.6% to 16.3%.Note
In 2019, about two-fifths (37.7%) of both rural and urban small businesses were unincorporated, while three-fifths (62.3%) were incorporated. Relative shares were similar in 2017 and 2018.
Data table for Chart 1
| 2017 | 2018 | 2019 | |||||||
|---|---|---|---|---|---|---|---|---|---|
| Rural | Urban | All areas | Rural | Urban | All areas | Rural | Urban | All areas | |
| counts of businesses | |||||||||
| Unincorporated enterprises | 112,086 | 596,808 | 708,894 | 113,031 | 615,659 | 728,690 | 114,481 | 651,572 | 766,053 |
| Incorporated enterprises | 193,262 | 1,002,456 | 1,195,718 | 197,002 | 1,049,886 | 1,246,888 | 197,971 | 1,067,081 | 1,265,052 |
| All businesses | 305,348 | 1,599,264 | 1,904,612 | 310,033 | 1,665,545 | 1,975,578 | 312,452 | 1,718,653 | 2,031,105 |
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Rural medium business counts grew slower than those of urban counterparts
Between 2017 and 2019, the counts of rural medium businesses in Canada increased 7.9% from 6,900 to 7,400, while the number of urban medium businesses increased 8.5% from 40,400 to 43,800 (chart 2). The growth rates of medium business counts were higher for both rural and urban regions when compared to the corresponding rates for small businesses (2.3% and 7.5%, respectively). Hence, rural business count growth rates trailed those of their urban counterparts for both small and medium businesses, nonetheless the rural-urban differential was lower for medium businesses.
The share of rural medium business counts was 14.5% of the country’s total count for medium-sized businesses in 2019.
Data table for Chart 2
| Rural | Urban | |
|---|---|---|
| counts of businesses | ||
| 2017 | 6,901 | 40,390 |
| 2018 | 7,434 | 42,801 |
| 2019 | 7,446 | 43,823 |
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Small business average revenues higher in rural areas
Rural small businesses on average brought in higher revenues than urban small businesses (Chart 3). Over the three years from 2017 to 2019, rural small businesses brought in average yearly revenues of $443,700, which was 11.8% more than the $396,900 average for urban areas.
Between 2017 and 2019, rural small business average annual revenues increased by 1.0% over the same period. For urban small businesses, average annual revenues decreased 1.0% over this period.
Average revenues for rural small businesses that were incorporated were $622,100 in 2019, while for unincorporated businesses, this figure was $130,500. The corresponding values for urban small businesses were lower at $566,900 for incorporated and $115,400 for unincorporated businesses.
Data table for Chart 3
| 2017 | 2018 | 2019 | ||||
|---|---|---|---|---|---|---|
| Rural | Urban | Rural | Urban | Rural | Urban | |
| dollars | ||||||
| Unincorporated businesses | 128,200 | 110,200 | 130,200 | 113,300 | 130,500 | 115,400 |
| Incorporated businesses | 629,500 | 567,800 | 623,200 | 565,100 | 622,100 | 566,900 |
| All businesses | 445,900 | 394,300 | 443,500 | 398,100 | 441,600 | 398,400 |
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Rural small businesses had higher average annual revenues in 2019 than urban counterparts in a majority of provinces as well as in Yukon and Northwest Territories.Note However, in the four Atlantic Provinces, as well as in British Columbia, it was small urban businesses that had higher average revenues in 2019. Among provinces, the highest values for average revenues for rural small businesses were in Saskatchewan ($517,800) and Manitoba ($508,800), while the lowest were in Newfoundland and Labrador ($374,700) and British Columbia ($382,800). Nunavut rural small businesses had the highest average revenues ($678,400) among territories, while Yukon had the lowest values ($534,800).
Businesses in rural and urban settings had similar average revenues
In the three years from 2017 to 2019, the average annual revenues for rural medium businesses were $9.3 million, while for urban medium businesses, this figure was $9.5 million (Chart 4). This is a contrast to the case for small businesses, for which rural businesses had higher average annual revenues over this period ($443,700) than their urban counterparts ($396,900).Note Both rural and urban medium businesses had an increase of about 0.5% in their average annual revenues between 2017 and 2019.
Data table for Chart 4
| Rural | Urban | |
|---|---|---|
| dollars | ||
| 2017 | 9,259,400 | 9,499,600 |
| 2018 | 9,255,700 | 9,519,900 |
| 2019 | 9,306,000 | 9,547,300 |
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Over half of rural small business revenues generated in three industries
Rural small businesses earned $139,300 million in total revenues in 2019, while their urban counterparts made $677,700 million in the same year. In terms of share, 17.1% of small business revenues were in rural areas and 82.9% in urban areas.
The distribution of small business revenues among industries was different in rural and urban areas (Chart 5). The industries with the highest share of revenues among rural small businesses in 2019 were agriculture, forestry, fishing and hunting (23.5%), construction (15.6%) and retail trade (13.8%). These three industries accounted for over half (52.9%) of the revenues of small businesses in rural areas in 2019. For rural medium businesses, the same three industries had the highest share of revenues and made up 55.9% of the revenue.
In urban areas, construction (14.7%) and retail trade (10.8%) had significant shares of small business revenues, as they did in rural economies. Other urban industries with relatively high shares were professional, scientific and technical services (11.4%), health care and social assistance (10.6%), and real estate and rental and leasing (9.3%). These five industries together made up 56.8% of urban small business revenues in 2019. On the other hand, the five largest industries in urban areas for medium businesses made up 68.0% of the revenues for these businesses (construction, retail trade, wholesale trade, manufacturing, and professional, scientific and technical services). The following section provides further insights into the revenues of rural and urban medium businesses.
Data table for Chart 5
| Rural | Urban | |
|---|---|---|
| percent | ||
| Agriculture, forestry, fishing and hunting | 23.5 | 2.3 |
| Construction | 15.6 | 14.7 |
| Retail trade | 13.8 | 10.8 |
| Transportation and warehousing | 6.8 | 5.2 |
| Accommodation and food services | 5.9 | 7.3 |
| Other services (except public administration) | 5.6 | 6.8 |
| Manufacturing | 4.9 | 5.2 |
| Real estate and rental and leasing | 4.6 | 9.3 |
| Health care and social assistance | 4.6 | 10.6 |
| Professional, scientific and technical services | 4.1 | 11.4 |
| Wholesale trade | 3.7 | 6.0 |
| Administrative and support, waste management and remediation services | 2.7 | 4.7 |
| Mining, quarrying, and oil and gas extraction | 1.5 | 0.4 |
| Arts, entertainment and recreation | 1.1 | 1.5 |
| Management of companies and enterprises | 0.7 | 1.4 |
| Information and cultural industries | 0.4 | 1.4 |
| Educational services | 0.3 | 1.0 |
| Utilities | 0.2 | 0.1 |
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Note: All industries are included except: finance and insurance; and, public administration. Source: Statistics Canada, Rural Canada Business Profiles, 2017-2019. |
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Five industries made up four-fifths of rural medium business revenues
Of the $487,700 million in total revenues for medium businesses in 2019, $69.3 million (14.2%) were generated by businesses in rural areas and $418,400 million (85.8%) in urban areas.
Over two-fifths of the 2019 revenues of rural medium businesses were earned in retail trade (28.6%) and agriculture, forestry, fishing and hunting (14.8%) (Chart 6). Together with construction (12.5%), manufacturing (12.4%), and wholesale trade (11.1%), the five largest industries in terms of revenues of rural medium businesses comprised nearly four-fifths (79.5%) of the 2019 revenues of medium businesses. In comparison, the concentration of revenues among the five largest industries for rural small businesses was 65.6% (other analysis on rural and urban small business revenues was seen in the previous section).
About two-thirds of urban medium business revenues were in five industries. As in rural areas, construction (16.9%) and retail trade (16.6%) businesses were important contributors to the revenues of medium businesses in urban areas. The next three most significant industries for urban medium businesses in terms of revenue shares in 2019 were wholesale trade (15.6%), manufacturing (11.8%), and professional, scientific and technical services (7.0%).
Data table for Chart 6
| Rural | Urban | |
|---|---|---|
| percent | ||
| Retail trade | 28.6 | 16.6 |
| Agriculture, forestry, fishing and hunting | 14.8 | 2.0 |
| Construction | 12.5 | 16.9 |
| Manufacturing | 12.4 | 11.8 |
| Wholesale trade | 11.1 | 15.6 |
| Transportation and warehousing | 6.8 | 5.8 |
| Accommodation and food services | 2.5 | 3.7 |
| Mining, quarrying, and oil and gas extraction | 2.4 | 1.0 |
| Administrative and support, waste management and remediation services | 1.7 | 4.6 |
| Other services (except public administration) | 1.7 | 2.7 |
| Real estate and rental and leasing | 1.3 | 4.6 |
| Health care and social assistance | 1.1 | 2.1 |
| Professional, scientific and technical services | 0.9 | 7.0 |
| Management of companies and enterprises | 0.7 | 2.4 |
| Arts, entertainment and recreation | 0.5 | 0.6 |
| Information and cultural industries | 0.4 | 2.0 |
| Utilities | 0.4 | 0.1 |
| Educational services | 0.1 | 0.5 |
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Note: All industries are included except: finance and insurance; and, public administration. Source: Statistics Canada, Rural Canada Business Profiles, 2017-2019. |
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Definitions
- Using Statistics Canada’s Standard Geographical Classification (SGC) 2016,Note businesses located in either census metropolitan areas (CMAs) or census agglomerations (CAs) are classified as “urban” and all others as “rural”.
- 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.
- An unincorporated business is typically a sole proprietorship or partnership where the owner(s) and the business are the same, and the owner(s) bear all results of the business.Note
- An incorporated business is a separate entity from the owner(s).
- Industries are defined using the North American Industry Classification System (NAICS).Note
Methodology
This analysis uses Statistics Canada’s Rural Canada Business Profiles (RCBP) database, which is based on business tax returns filed with the Canada Revenue Agency. The RCBP contains annual data on key financial variables for small and medium businesses by rural and urban areas. The first version of the RCBP, released on March 11, 2022, provides data for the three years from 2017 to 2019. A reference year for RCBP runs from January 1 to December 31.
The main variables in the RCBP include: counts of businesses, revenue and expense breakdowns, and balance sheet items (assets. Liabilities, equity breakdowns), financial ratios. Data are arranged, as feasible, by various levels of geography (e.g., province/territory), rural and urban areas, industry, incorporation status, and profitable and non-profitable businesses. All regions across Canada and all industries except finance and insurance and public administration are included. For small businesses, data are provided at the Canada, region, and province/territory levels, as well as by rural and urban areas of these geographies. Owing to the need for protecting business confidentiality, for medium businesses, in terms of geography, data are provided at the Canada-level only (country, rural and urban areas). While the RCBP provides separate tables for small and medium businesses, larger businesses are not included in this database.
Businesses file tax returns with the CRA on an annual basis. The RCBP is expected to be updated annually as new tax records become available and are processed. The lag for the latest tax year available in an RCBP release may be reduced in the future as the development cycle of the RCBP is expected to be shortened after the initial release(s).
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