How Many Employees Should a Small Business Have?

Feb 18, 2021
5 minute read

Whether you have an existing small business or are interested in starting a new company, you may have some questions about how different business sizes are categorized in Canada. As you’ll find out, all kinds of companies fall under the category of small business. Small businesses make up a large part of the Canadian economy, and as an entrepreneur, you’re part of that important segment.

What is considered a small business?

Canadian business size standards are based on the number of employees rather than sales or revenue. According to the Government of Canada’s Key Small Business Statistics, you must have between 1-99 paid employees to be considered a small business. Businesses with 100-499 employees are considered medium-sized, and those with 500 employees or more are considered large businesses.

These government stats also show that the overwhelming majority of employer businesses in Canada—1.15 million—are within the small business size standards. While they may be small individually, these businesses account for nearly 70% of Canadian private sector employees.

I’m self-employed. Am I a small business?

One important thing to note is that in this report, self-employed businesses are not considered small since they do not technically have paid employees. However, small businesses often start out as self-employed entrepreneurs or single-person corporations before hiring their first employee and becoming a small business by this government definition.

Which industries employ the most small business workers?

As such a large market share of the Canadian economy, small businesses cover a wide range of fields, including agriculture, construction, healthcare, education, manufacturing, and everything in between.

The single largest industry by the number of small business employees is wholesale and retail trade.

What is the average number of employees in a small business?

If you think that range of 1-99 employees is quite large, you’re right. A business with two employees will look very different from a business with 90 employees, with different day-to-day operations and likely much larger revenue.

When people use the term small business colloquially, they’re likely thinking of a business size smaller than 99 employees. This is in line with the majority of small businesses in Canada, where nearly 55 per cent of companies consider small employees between 1-4 people; if you add small companies with 5-9 employees, that accounts for nearly 75 per cent of small businesses.

Do I need to hire employees for my small business?

You might find that you’ve reached a point where you are struggling to grow your small business on your own or with your small team. When you start seeing these indicators, it may be time to hire an additional employee. Signs to look out for include an increase in customer complaints and increased service or shipping delays.

A new hire can free up some of your time so you can focus on your business strategy or other areas where you are particularly competent. It also introduces new experience and skills to your small business. Of course, bringing on a full-time or even part-time employee also means adding them to the payroll, so some of your financial resources will go towards the new hire.

If your needs are tied to a specific season or project, you may be better off outsourcing some parts of the project to an agency or freelancer rather than hiring a new employee.

How do I know when it’s time to hire an employee?

Even if you have been a sole proprietor working on your own, a useful step before hiring is to create an organizational chart. This will outline the professional functions required to fulfil your small business needs. Business owners may be responsible for most of these tasks at the beginning, but the chart will help you determine which tasks you’d like to delegate to someone else.

Too few employees can restrict a company’s ability to deliver its product or services to its customers, while too many people can leave companies strapped for cash.

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