Canadian small businesses are closing faster than they’re opening: report

A new study finds small businesses are shutting-down faster than they are starting-up.

A new report shows small businesses in Canada are closing faster than they’re opening.

Part one of the report, titled Canada’s Entrepreneurial Drought, by the Canadian Federation of Independent Business (CFIB), examined the imbalance between business creation and closures across Canada. It found, over the past six quarters, more businesses have closed than opened.

Findings showed more than half of small business owners, or 55 per cent, say they would not recommend starting a business right now.

“When more than half of business owners wouldn’t recommend entrepreneurship, that’s a serious warning sign. Governments need to refocus on lowering costs, reducing red tape, and creating the conditions for small businesses to succeed,” said Louis-Philippe Gauthier, CFIB Atlantic vice-president, in the report.

The report says the current business landscape has been in an “entrepreneurial drought,” which means business closures outpaced openings for a period of four or more quarters, since 2024. While business creation has been slowing since the mid-1980s, openings had mostly outpaced closures, which is no longer the case.

In the second quarter of 2025, exit rates reached 5.6 per cent, and in Q4 that year, entry rates fell to 4.8 per cent, which show some of the highest closure and weakest startup rates since the pandemic.

“I’m not shocked by that at all,” said Cathy Hope, owner of Lady Luck Boutique in Halifax. “It’s hard to recommend not doing something that you love, because I really love this, but I do think that it’s worth a good thought as to as to whether this is going to work for you.”

Findings also showed business owners feel discouraged with current government when it comes to the pressures facing small businesses. Two-thirds of small firms nationally said they feel unsupported by their provincial governments, while only three per cent strongly believe their government has a clear vision for entrepreneurship.

“The economy just doesn’t support new businesses,” said Kerry Foss, owner of Sudz in the City in Dartmouth, N.S. “If you do an online business and it’s just a side thing for you, you’re going to be fine. But if it’s something that you rely on for your full income, it’s not very encouraging.”

The lack of confidence in government from business owners was not only provincial, as the report showed 73 per cent of small businesses are not confident in the federal government.

“Small business owners are facing record‑high costs, mounting taxes, and endless red tape, while governments focus elsewhere. You can’t grow an economy by pricing entrepreneurs out of it,” said Gauthier. “If we want a stronger, more competitive economy here at home, we need to make it easier, not harder, for entrepreneurs to get started and grow.”

Part two of the report will be released on April 28 and will include recommendations for the government to help business owners.