The Decline of American Small Business: Implications for Canadian Entrepreneurs

The landscape of small business in the United States has undergone significant changes over the past few decades, with a marked decline in new business formations and overall economic dynamism. Several studies and reports, including those from the Brookings Institution, the Kauffman Foundation, the Economic Innovation Group, and the U.S. Census Bureau, have detailed these trends. For Canadian small business owners, understanding these findings can provide valuable insights and cautionary lessons to navigate similar challenges in our own economy.

Key Findings from American Studies

  1. Brookings Institution Report (2014):
    The Brookings report, “The Slowdown in Business Dynamism,” highlighted a sharp drop in the rate of new business startups in the U.S. From 13% in the 1980s, the startup rate fell to around 8% by 2011. This reduction in new business creation is a critical indicator of declining economic dynamism and innovation.
  2. Kauffman Foundation Reports:
    The Kauffman Index of Startup Activity has shown a general decline in new business formation, with fewer people venturing into entrepreneurship. The “Main Street Entrepreneurship” reports further indicate lower survival rates for small businesses and fewer businesses reaching maturity.
  3. Economic Innovation Group (EIG) – “Dynamism in Retreat” (2017):
    This report emphasized the decline in economic dynamism, noting that the proportion of employment in new firms halved from 1992 to 2011. The economy is becoming increasingly dominated by older, more established firms, stifling innovation and opportunities for small businesses.
  4. U.S. Census Bureau Data:
    The Business Dynamics Statistics (BDS) program data reflects a consistent decline in the startup rate since the late 1970s. Moreover, the growth rate of small employer firms has slowed, and the proportion of employment by small businesses has decreased.
  5. Federal Reserve Reports:
    The Small Business Credit Survey by the Federal Reserve highlights financial challenges faced by small businesses, including access to credit, competition from larger firms, and regulatory burdens. The 2021 report revealed that many small businesses experienced revenue declines and difficulties securing necessary credit.
  6. Harvard Business Review (HBR) – “Why U.S. Entrepreneurship Is In Decline”:
    The HBR article discusses several factors contributing to the decline in U.S. entrepreneurship, such as increased market concentration, rising student debt, and shifts in workforce preferences. It also points to a reduced entrepreneurial spirit and risk-taking among younger generations.

Implications for Canadian Small Business Owners

While these findings are specific to the U.S., they hold significant implications for Canadian small business owners. Here are some key takeaways and strategies to consider:

  1. Foster a Vibrant Startup Ecosystem:
    To counteract a decline similar to that in the U.S., Canada must continue to support a vibrant startup ecosystem. This involves providing resources, mentorship, and networking opportunities to aspiring entrepreneurs. Government initiatives and private sector support can play crucial roles in fostering innovation and business creation.
  2. Enhance Access to Capital:
    Ensuring that small businesses have access to necessary funding is critical. Canadian financial institutions and government programs must prioritize making credit and investment more accessible to startups and small enterprises. Innovative financing solutions, such as crowdfunding and venture capital, can also help bridge the gap.
  3. Encourage Risk-Taking and Entrepreneurship Education:
    Cultivating an entrepreneurial mindset among younger generations is essential. This can be achieved through education programs that emphasize entrepreneurship, risk-taking, and innovation. Encouraging students to pursue entrepreneurial ventures and providing them with the tools to succeed can bolster the future of small business in Canada.
  4. Address Regulatory and Competitive Challenges:
    Streamlining regulations and reducing bureaucratic hurdles can help small businesses thrive. Additionally, measures to ensure fair competition, such as anti-monopoly regulations, can prevent market concentration from stifling small business growth.
  5. Support Business Resilience and Adaptability:
    The ability to adapt to changing market conditions is crucial for small businesses. Providing training and resources to help businesses become more resilient and adaptable can mitigate the impact of economic downturns and other challenges.
  6. Leverage Technology and Innovation:
    Embracing technological advancements and innovative business models can give small businesses a competitive edge. Encouraging the adoption of digital tools and platforms can enhance efficiency, reach, and customer engagement.


The decline of small businesses in the United States offers a cautionary tale for Canadian entrepreneurs and policymakers. By understanding these trends and proactively addressing the challenges they reveal, Canada can cultivate a robust small business sector that drives economic growth, innovation, and resilience. The lessons from our southern neighbors underscore the importance of fostering an environment where small businesses can start, grow, and thrive.

Written by ChatGPT
Directed by Randal Adcock

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