Canadian small and medium sized businesses (SMB) outperformed larger business through the recent recession, according to a new report.

Compared to last year the number of SMBs grew through the recession, their employment remained steady and fewer SMBs went bankrupt, found a small business report from CIBC World Markets.

"By almost any measure, Canadian SMBs surprised on the upside during the recent recession," says Benjamin Tal, senior economist, and author of the report. "The secret lies in the relative strength of the Canadian consumer. The consumer is the chief determinant of the destiny of a SMB, and more confident consumers are a pre-condition for SMB success."

Many SMBs do most of their business within Canada, so a strong Canadian dollar does not have the same impact as it does for larger companies who do business outside Canada.

SMBs success could be attributed to an increase in corporate outsourcing among large corporations. Two in three Canadian SMB would not be able to start-up without outsourcing, with half opening after receiving an initial contract.

Eight macro factors were used to assess which provinces are likely to benefit from structural increase in SMB activity. They were:

• Momentum indicator - growth in self-employment over the past three years;
• Economic growth;
• Sectoral mix - The extent to which the fastest growing sectors in the economy are also SMB-friendly;
• Urban/rural mix - The concentration of SMBs in large urban centers;
• SMBs survival rate - The likelihood that an SMB survives beyond three years of existence;
• Net migration - The contribution of new immigrants to growth in the labour force. The motivation here is that new immigrants have a higher tendency to become self-employed;
• Outsourcing activity - The propensity by large corporations to outsource core activity;
• Age structure - Growth in the 35-55 age group.

Alberta ranked highest for growth, followed by Ontario, where SMBs are more susceptible because of a high reliance on exports and the automotive industry.

"British Columbia, the province with the largest economic contribution from small business, will remain an attractive spot for SMEs due to economic growth that is likely to match the national average, high small business survival rates, and a projected strong inflow of new immigrants," states Mr. Tal.

Quebec and Saskatchewan ranked fourth and fifth respectively. Quebec benefits from an expanding service industry and cooperation between SMBs and large corporations.

Provincial rankings were (macro factors score in brackets):

• Alberta (10.0);
• Ontario (9.8);
• British Columbia (9.5);
• Quebec (9.5);
• Saskatchewan (9.2);
• Manitoba (9.0);
• Nova Scotia (8.8);
• Prince Edward Island (8.8);
• New Brunswick (8.7);
• Newfoundland and Labrador (8.5).

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