The majority of small businesses in Canada (92%) are using digital tools in their business, but only 10% have fully integrated them across operations, leaving substantial productivity and growth potential untapped, finds a new report by the Canadian Federation of Independent Business (CFIB) co-sponsored by Payworks and Sage.
As Canada’s productivity grew only 3% over the last decade compared to 18% in the United States, the report highlights how digital adoption has the potential to play an increasing role in Canada’s economy.
Over half (55%) of businesses saw returns on their tech investment within the first two years, with an average 29% boost in productivity in first year. On average for every $1 invested, businesses saw $1.60 in return. Digital Leaders, those who have fully integrated digital tools across all core functions, report $2.40 in returns for every $1 invested–1.7 times higher than their less mature counterparts.
“Digital transformation isn’t just a buzzword–it’s becoming a key differentiator in small business success,” said Marvin Cruz, CFIB’s director of research and report co-author. “While not a panacea, digital tools can help inspire content, speed up projects, and automate repetitive tasks, freeing up time to take on more clients or focus on other important work such as strategy or personalized marketing.”
While in the past three years business investments mostly focused on accounting, cybersecurity, and IT, there’s growing confidence in AI’s potential to boost productivity. Nearly a quarter (23%) of SMEs have invested in generative AI (GenAI) tools over the past three years, and 25% plan to do so in the next three. Interest in AI analytics is also on the rise, with planned investments set to more than double–from 7% to 16%.
CFIB’s research shows that SMEs using GenAI can double their time, gaining an extra hour for every hour they use it, time that can be redirected to other business tasks. On average Canadian SMEs have saved 1.08 hours per day using GenAI. If even half of that time were reinvested into productive work, it could boost Canada’s GDP by $12.8 billion. However, many small businesses are still stuck at the starting line, held back by cost, lack of time, or limited digital skills to fully capitalize on this potential.
“While there’s growing interest in adopting AI and overall technology, small firms are still early in the journey,” said Alchad Alegbeh, Research Analyst at CFIB. “Helping SMEs go from early adoption to deeper integration is the next frontier and a big opportunity for Canada’s economy.”
As Ottawa is launching public consultations on its AI strategy, and to speed up progress and boost Canada’s broader productivity, CFIB recommends policymakers:
- Raise awareness about available government programs and incentives for digital and AI adoption.
- Introduce tax-based incentives such as investment tax credits, accelerated capital cost allowances, or a return to immediate expensing which would give small firms the ability to write off up to $1 million in capital expenses related to digital investments.
- Provide tax relief (e.g., reductions in corporate and payroll taxes) to give SMEs the financial space to invest in technology and training.
- Offer accessible guidance to help SMEs understand how AI and other digital technologies can support their business goals–through simplified resources, success stories, and sector-specific examples.
