Key points

• Despite Alberta's strong overall economic performance, small and medium-size enterprises (SMEs) are facing a profitability squeeze due to shifting consumer demand, rising commercial rents, and rising raw material and input costs. 
• To deal with these pressures, business owners say they are taking a number of measures, including raising prices, absorbing margin hits, slowing or halting capital expansions, and prioritizing workforce retention over headcount growth. 

Alberta is outperforming the rest of the country on a number of economic indicators: population growth, employment growth, and consumer spending. However, headline numbers often mask sentiment in the economy, including that of small businesses. 

Alberta small businesses are navigating rising input costs, shifting consumer demand, and difficult hiring decisions.

Our second edition of The Quarterly Small Business Pulse aims to bridge the gap between the macro and micro by combining economic data and the on-the-ground experiences shared by the business community in Alberta.

In this edition of the Pulse, which features a client interview and a survey of 78 Alberta business owners, we unpack how entrepreneurs are adapting to an environment where uncertainty is no longer a temporary headwind, but a baseline condition for operating.

Key themes explored in this quarter’s Pulse:

• The squeeze on profitability: We break down the top three pressure points SMEs are facing right now: shifting consumer demand, rising and volatile upstream raw material/input costs, and higher commercial retail rents.
• The strategic trade-off: How are businesses adapting to these operational bottlenecks? We look at the breakdown of how Alberta SMEs are splitting the burden of rising costs—from raising end-user prices to absorbing margin hits. We also explore why some are putting capital expansions on hold, and what that cautious holding pattern means for hiring intentions over the next six months.

A look at some of the findings:

• Despite a 7.6% surge in year-to-date retail sales in Alberta, 30% of business owners cited weak consumer demand as a top challenge. Rising household costs for food and energy are leaving less room for discretionary purchases.
• While U.S. tariffs make headlines, the Alberta SMEs we surveyed remain largely insulated—82% generate zero revenue from U.S. customers and over 50% have no direct U.S.-sourced inputs. However, businesses continue to face heightened uncertainty and indirect supply chain impacts from tariffs and other geopolitical events. 
• To manage the squeeze, business owners are splitting the burden: 40% are raising end-user prices, 30% are absorbing the margin impact, and 28% are delaying or cancelling capital expansions. With regard to employee headcount, businesses seem to be focused on retention, with nearly 70% planning to maintain their current employee headcount over the next three to six months. At the same time, 27% are planning to expand headcounts, a higher rate than observed in national surveys.

The bottom line: While Alberta’s economy continues to prove its resilience, the cost of doing business has increased. Alberta SMEs have also proven resilient, but the road ahead will be littered with the direct and indirect fallout of supply chain friction and uncertainty. Looking to the future, businesses appear to be taking a disciplined approach—safeguarding profit margins, maintaining strong cash reserves, and holding onto the team that drives their operations. 

Answer to the previous trivia question: The typical capacity of a Very Large Crude Carrier (VLCC), the standard large tanker used for global oil transport, is about 2 million barrels.

Today’s trivia question: In what year did the Canadian federal government officially designate October as Women’s History Month?