Small firms report growth and rising AI adoption despite intensifying cost pressures and trade uncertainty
Canadian small businesses are showing surprising strength in the face of higher operating costs and continuing tariff uncertainty, according to the newly released Zoho Canada Business Outlook.
The report from Zoho Corporation, based on a November 2025 survey of 1,000 business leaders, finds 60.8% of respondents experienced growth in the past six months, while 62.1% expect better business conditions going into 2026. That positivity persists even as two thirds cite tariff related expenses as their most serious threat.
Ontario leads the country with 63.2% reporting recent growth and 65.4% expressing optimism about the next six months. British Columbia lags with 52.9% seeing gains and only 55.5% anticipating any improvement. Quebec sits at 58% growth and 60.3% optimism, while Alberta posts above-average performance at 60.6% growth but a slightly lower 56.8% confidence outlook.
Workforces appear stable, with 44.1% hiring and nearly half expecting no change in staffing levels. Only 11.2% predict layoffs.
One of the clearest shifts emerging from the survey is a rapid move toward artificial intelligence as a buffer against rising costs. The data shows 23% of businesses have already implemented AI solutions to reduce tariff impact, while 41.9% are assessing their options. Practical applications range from exploring new export markets (45.9%) to shoring up domestic supply chains (41%) and using dynamic pricing tools (39.3%).
“There is a strategic shift underway among Canadian businesses,” says Chandrashekar LSP, Managing Director, Zoho Canada. “They aren’t waiting for economic conditions to stabilize - they’re proactively redesigning their operations. The move toward AI and automation is about building resilience, improving margins, and protecting customer experience in an environment where costs are rising and predictability is hard to come by. That level of adaptability is why optimism remains strong going into 2026.”
Technology priorities have also evolved, with efficiency and innovation taking precedence over flexible work initiatives. Meanwhile, customer experience ranks second among overall business priorities, and talent development continues to sit at the bottom, despite labour market challenges.
The findings suggest that while Canadian SMEs remain uneasy about government-driven trade constraints, they are less focused on funding support than on reducing interprovincial barriers and opening access to more international partners.
Despite the challenging backdrop, the report highlights that small businesses aren’t waiting for conditions to improve, they’re adapting to make sure they do.
