Canadian small and medium-sized businesses are facing increased financial pressure, with nearly three-quarters saying they have little or only some capacity to absorb additional costs before having to make significant operational changes, according to a new survey by Powerpay.
The survey found that 74 per cent of respondents have limited capacity to absorb further financial pressure, while 64 per cent said it is somewhat or much harder to operate a small business in Canada than it was 12 months ago. Despite those pressures, 48 per cent described themselves as optimistic or very optimistic about their business outlook over the next year.
The findings are based on a survey of 356 Canadian small and medium-sized business owners and operators who are Powerpay customers, with each respondent representing a separate company. The data was collected in September 2026 and examined business confidence, economic pressures, hiring and workforce trends, technology adoption and the outlook for Canadian small businesses.
Businesses adjust to higher costs
Small-business owners surveyed said they are taking a range of measures to manage current economic conditions, with raising prices the most common response at 48 per cent. Another 39 per cent said they have cut expenses, while 28 per cent have delayed hiring and 23 per cent have delayed salary increases.
Operating costs and inflation were identified as the biggest concern by 40 per cent of respondents. Difficulty finding the right talent was the second-largest concern at 19 per cent, followed by the impact of U.S. tariffs at 16 per cent.
Behrad Bayanpour, general manager of Powerpay, said the survey shows business owners are taking steps to manage pressure while continuing to operate.
“Canadian small businesses have always been remarkably resilient, and these findings show that resilience in action. Business owners are making tough decisions – such as managing costs more closely, delaying hiring and salary increases, and in many cases taking on more themselves – to keep their businesses moving forward,” said Bayanpour. “But resilience shouldn’t be mistaken for unlimited capacity. Many businesses are telling us they don’t have much room left to absorb additional financial pressure, yet remain optimistic and are ready to invest in their people and growth when conditions allow.”
The survey also found that the financial and operational pressures are affecting business owners personally. Almost one-third of respondents, or 32 per cent, said they are working longer hours, while the same proportion said they have taken on responsibilities previously handled by employees or contractors. Another 28 per cent reported increased stress about the future of their business and 16 per cent said they are paying themselves less.
Outlook remains positive for some businesses
Despite the challenges, 24 per cent of respondents said their financial health had improved over the past year, compared with 22 per cent who said it had declined. Forty-two per cent expect their revenue to grow over the next 12 months.
Among respondents, 40 per cent described themselves as optimistic about their business outlook for the next year, while another eight per cent said they were very optimistic. Resilience and preparedness were identified as the leading drivers of that confidence.
Hiring conditions remain difficult for businesses seeking workers. Fifty-eight per cent of respondents said their local hiring market is tight, making it difficult to find the right talent. At the same time, 32 per cent said they are not hiring, while 10 per cent reported having a surplus of available workers.
If economic conditions improve, employees are expected to be a priority for many businesses. Nearly 40 per cent said they would prioritize investment in employees, including 21 per cent who would hire more staff and 17 per cent who would increase pay.
AI adoption remains limited
The survey also examined the use of artificial intelligence among Canadian small businesses. Thirty-eight per cent of respondents said their businesses do not currently use AI.
Among those that do use the technology, administrative tasks were the most common application at 46 per cent, followed by marketing and content at 20 per cent. Saving time on administrative work was the most commonly cited benefit.
The survey also asked business owners to put current challenges into a broader perspective. Fifty-five per cent said the challenges they face today are nothing new because economic hardship has always been part of running a business. However, 32 per cent said they had not expected it to be this difficult to succeed.