Xero, the global small business platform, released on Tuesday its quarterly Xero Small Business Insights (XSBI) report, a snapshot of the health of the Canadian small business (SMB) sector, revealing a significant decline in sales growth in the last quarter of the year.
The report said the data indicates the “uncertain macroeconomic environment and an increasingly volatile Canadian small business landscape.”
“Heightened macroeconomic uncertainty, heavily disrupted supply chains, and shifting trade policy have significantly impacted the Canadian small business economy. We’re now seeing the true cost of a fractured global economy show up at the SMB level,” said Louise Southall, Economist at Xero.
“The small business sector started last year in a solid position, following earlier policy interest rate cuts by the Bank of Canada. But throughout the year, the general trend in Canada’s small business sales growth slowed, culminating in a decline in sales in the final quarter.”
According to the report, from October to December 2025, Canadian small business sales growth dropped 4.1% year-over-year (y/y), the largest quarterly decline in sales since the September quarter 2020, falling well below the long-term series average of 4.5% y/y.
Despite a solid start to 2025, sales growth slowed each quarter before experiencing a notable decline in the quarter to December. Over the same period, the length of time small businesses waited to be paid remained steady at approximately 27 days (26.8 days in the quarter to December), and late payments improved marginally, with late payments averaging 9.7 days in the December quarter, added Xero.
Regionally, Alberta maintained sales growth results well above the national average over the course of the year, experiencing significant growth in the March, June, and September quarters (+11.0%, +2.9%, and +3.8%, respectively). Meanwhile, British Columbia experienced the weakest result, with sales dropping 8.2% y/y in the quarter to December. Time to be paid metrics showed considerable volatility between provinces from quarter to quarter, but Alberta generally outperformed British Columbia and Ontario, dropping to 26.6 days in Alberta in the quarter to December, explained the report.
“In an operating environment that is increasingly irregular and unpredictable, it’s incredibly challenging for small business owners to anticipate demand or make strategic plans right now,” said Ashalee Mohamed, Head of GTM for Canada at Xero.
“While the road ahead is uncertain, Canadian small businesses have proved time and again that they can be agile and resilient in the face of uncertainty. Small business owners should prioritize decisions that are within their control and look for ways to insulate themselves against market uncertainty wherever possible.”
To access the latest data, visit xero.com/xerosbi.
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