Entrepreneurship in Canada is facing dual pressures, with fewer people starting businesses and those who have now struggling with inflation and rising interest rates. Two reports released Monday—one from the Business Development Bank of Canada (BDC) in partnership with the Université de Montréal and the other from the Bank of Canada—highlight the current barriers to running a business, and why gritty leaders might be best positioned for success. 

Here’s what you need to know: 

100,000: How many more business owners Canada had 20 years ago compared to today, according to the BDC report. That means just 1.3 people for every 1,000 are starting a business. In 2000, that rate was closer to three business owners for every 1,000. 

Canada’s aging population is a main culprit: People in their late 20s to early 40s are the most likely to start businesses, but that demographic is shrinking, the report noted. Companies are also generally larger than they were 20 years ago, making it harder for startups to compete. The labour market, meanwhile, has been relatively strong, with low unemployment and higher wages attracting would-be entrepreneurs into the job market. 

The report also noted that the increasing complexity of running a business may be a deterrent, citing “labour shortages, technology disruptions and rising costs.” 

Bridging the gap: BDC identified skills that could help entrepreneurs succeed, like marketing and finance (crucial at the startup phase) and administration and operational skills (important for scaling). The most valuable attribute, according to survey respondents, was relationship skills and grit: the ability to resolve problems, manage failure and adapt to change. 

Interest rates are biting: The Bank of Canada’s study, meanwhile, found that about three-quarters of firms in its survey said the central bank’s interest-rate hikes have hurt them, and a vast majority think the effects of the economy-cooling hikes are halfway over or less—a plurality think they’re only beginning.

Anxiety about what’s coming: Firms in the central bank’s survey remain worried about declining demand; they reported their sales outlooks—forecast with things like advance bookings and inquiries—are flat compared to a year ago. The only times they’ve dipped into negative territory in the last 20 years were during the recession of the late 2000s and the COVID-19 shock of 2020.

Despite a softer labour market and de-snarled supply chains, more respondents than normal expect to raise prices, and more frequently than usual, over the next year. Because, although Canadian firms see inflation improving, they still expect it’s going to be about 3.4 per cent next summer, significantly higher than the Bank of Canada’s two per cent target.

And yet, the entrepreneurial spirit is alive: BDC found that about 14 per cent of respondents aspire to be entrepreneurs, about 100 times more than those who go on to actually start a business.