Intuit Canada said Friday its research found that 58 per cent of small business owners surveyed started out with less than $5,000 and 79 per cent started their business with less than $20,000.
"Canada is a nation of small businesses," said Barb Anderson, global product leader at Intuit, an accounting software company for small and mid-sized businesses.
Anderson said 98 per cent of businesses in Canada are small- or medium-sized.
The survey included business owners that had 20 employees or less and were service and product businesses.
Intuit Canada also said 19 per cent of those surveyed took out a loan or line of credit and 18 per cent drained their savings account when they started their businesses.
The first year of business can be a "really tumultuous time" and business owners have to get a handle on money coming in and money going out, she said.
About 85 per cent of new businesses survive one year and that drops to 70 per cent in the second year, Anderson said from Mississauga, Ont.
"One of the key reasons we know that businesses don't survive is due to poor financial management."
Intuit Canada said data from Statistics Canada shows that small businesses with fewer than 100 employees created 20,000 jobs in the last year and 48 per cent of the total private sector labour force is employed by small businesses.
"There's so many potential businesses out there and they have a dream and they have an idea and this really demonstrates to them that you can get it done with just small, small investments," Anderson said.
The Canadian Federation of Independent Business said many small business owners have started their business at their kitchen table.
"Tons and tons of small businesses are started on a shoestring," said federation chief executive Dan Kelly.
Kelly said small business owners go into business because they're good at something, like plumbing or cooking, but not necessarily good at managing money and should seek help.
"You're not automatically some financial guru just because you've started a firm. That's where many firms go wrong and there is a huge failure rate of many small businesses that go in with the best of intentions."
Meanwhile, a separate study by the Bank of Montreal (TSX:BMO) found six in 10 small business owners polled have seen the value of their business grow by an average of 39 per cent over the last five years.
The BMO study also found that 23 per cent of entrepreneurs surveyed valued the legacy it creates for their family and the income it generates.
"Canadian businesses are continually increasing in value: not only in an everyday, tangible sense, but in what the business brings to the entire family," said Steve Murphy, senior vice-president of commercial banking at BMO.
"With many Canadian business owners on the cusp of retirement and their businesses thriving, creating a succession plan should be a priority to ensure their hard-earned success continues in the way they envision it," Murphy said.
A BMO study conducted earlier this year found that 58 per cent of Canada's small business owners didn't have a succession plan in place.
The BMO survey was conducted by Pollara between Aug. 13 and Sept. 5 with 500 Canadian business owners. Results are considered accurate plus or minus 4.4 per cent, 19 times out of 20.
The Intuit Canada study was done online by Angus Reid Public Opinion between Aug. 16 and Aug. 21. Results are considered accurate plus or minus 4.4 per cent, 19 times out of 20.