At a glance
- Canada’s growing defence sector is creating opportunities beyond traditional defence contractors.
- Start with a clear value proposition, understanding of the defence ecosystem, and strong industry relationships to help you identify realistic opportunities.
- Assess your readiness across operations, finance, cybersecurity, procurement, and compliance—before committing to the market.
- Consider defence as part of your long-term business growth strategy, weighing the opportunity against the investment, risk, and commitment required.
Should we be looking at defence?
It’s a question more Canadian business leaders are asking.
Canada's defence sector is attracting attention from a wide range of businesses. However, before committing capital or pursuing contracts, leadership teams need to determine whether the opportunity actually fits their long-term strategy.
Economic uncertainty and the pressure to find new sources of sustainable growth are driving businesses across industries to explore new opportunities. This is particularly true for manufacturers.
At the same time, Canada, as outlined in the 2025 federal budget, has committed to a significant increase in defence spending as part of its efforts to meet its NATO commitments. Governments are also placing greater emphasis on strengthening Canadian supply chains and expanding domestic industrial capacity. Together, those shifts are creating new opportunities well beyond traditional defence contractors.
Mike Abbott, Partner, Technology & Regulatory Advisory at BDO Canada, believes the shift is significant enough that leaders should at least investigate what it could mean for them. “Every organization in Canada, regardless of industry, needs to be asking themselves at this moment whether or not they have a play in the defence sector,” he said.
That doesn't mean every company should enter defence. It means the breadth of what the sector buys—and the investment flowing into it—warrants a closer look.
Abbott encourages leaders to start with curiosity:
“You have to have a theory and an informed use case of how you could fit into the defence space,” Abbott said.
Building that theory starts with looking at the capabilities your business already has—and where they could create value in the defence market.
What’s your theory for entering defence?
Start with what your company already does well.
A manufacturer might find that an existing production process could serve a defence supplier. A technology company may identify a defence application for a commercial product. A logistics or infrastructure business may discover an opportunity several tiers into a larger supply chain.
Wuxly founder and CEO James Yurichuk has had an interest in defence and the military from a young age. The Toronto-based outerwear company, and BDO client, started looking at military textiles for inspiration to bring into consumer settings. Their involvement in defence deepened following Russia’s invasion of Ukraine, when they began supplying military equipment, such as female combat uniforms, parkas, and tactical soft goods.
That experience had Yurichuk curious about whether Canadian-made textiles and apparel would be valued in the Canadian defence space.
His curiosity took him to CANSEC, Canada’s largest defence and security trade show, in 2022. Armed with a pamphlet, he walked the show looking for organizations with textiles in their supply chains and asked where Wuxly might bring value to their operations.
This example illustrates what developing a theory can look like in practice: begin with an existing capability, then test whether the market values it.
That may be one of the most important conclusions a leadership team can reach.
Where does your business fit in the defence sector?
A theory is a starting point. Next, you’ll need to determine how to turn it into an opportunity. Many major projects are delivered by large prime contractors supported by extensive supplier networks. For a new entrant, the most credible opportunity may be several tiers into the defence supply chain rather than a direct Government of Canada contract.
Yurichuk advises companies to pursue both kinds of opportunities. Large government contracts may be attractive, but purchase orders from tier one and tier two suppliers can provide another route into major defence programs. “It takes a whole ecosystem to deliver on some of these projects,” he said.
A company may have a relevant product or capability but still need to determine where it belongs in the supply chain, who it needs to reach, and what will make it credible to prospective customers. Closing that gap requires relationships. Companies need to engage with the ecosystem, understand where demand exists, and test whether prospective customers see value in what they're offering. This work often begins well before a procurement opportunity appears. In defence, building visibility and credibility early can help position a business for opportunities as they develop.
For Yurichuk, the importance of relationship building has been one of the clearest lessons from Wuxly's experience.
“The in-person networking is just so important,” he said. “The industry seeks folks that show up and show up consistently.”
Part of the reason is that defence contracts can span years, so customers need confidence that their suppliers will be there to deliver.
That makes reputation and visibility important. Getting to industry events, talking to people at different levels of the ecosystem, and explaining clearly what the company can offer can help turn an initial theory into a credible route to market.
The next question is whether the business can deliver competitively.
Can your business compete in defence?
Winning work is only part of the equation. Delivering it profitably is another.
Entering defence before a foundation is in place can mean committing significant time and capital only to struggle with operational, compliance, or customer requirements. These challenges can affect a company's credibility and ability to compete for future opportunities.
Four areas deserve particular attention from leadership:
Defence is a highly competitive sector in which large programs are frequently awarded to prime contractors and work then moves through multiple tiers of the supply chain. This makes operational maturity and competitive margins critical for companies entering the market.
Businesses need a clear understanding of what it costs to deliver their product or service and the confidence that they can do so consistently.
That puts greater importance on visibility into costs, processes, and performance. Can you accurately calculate margins by product? Are your processes repeatable? Can you consistently meet quality, price, and delivery expectations?
“If you can come in and be very confident that you can deliver on a fixed margin and that you'll hit it consistently, that's a really great differentiator,” Abbott said.
What happens if you win the work?
Can production scale without compromising quality or margins? Will you need additional equipment, facilities, or talent? Can critical processes grow beyond the people who currently hold the institutional knowledge?
Scenario planning can help. Rather than investing immediately for demand that may not materialize, leaders can identify the operational triggers that would require additional capacity—and develop a plan for how the business would respond.
Capacity also includes people. Yurichuk describes Wuxly's move into defence as an “evolution” that required buy-in from the team. “Getting your culture engaged is super important,” he added.
For leaders contemplating a significant shift in strategy, organizational commitment can matter as much as production capacity.
Defence opportunities may require investment before meaningful revenue arrives. New equipment, technology, talent, capacity, and compliance upgrades can all create upfront costs, while longer procurement cycles can delay returns.
Leadership should understand the financial implications early. What will it cost to become ready? When will those investments need to be made? How much can the business reasonably fund? What happens to those investments if anticipated defence work doesn't materialize?
Government incentives, financing, partnerships, and other sources of capital may help support the strategy. The starting point, however, is understanding the investment required and whether the business can invest before the revenue arrives.
Defence work can bring cybersecurity, Controlled Goods Program, procurement, and other requirements depending on the contract and the company's place in the supply chain.
Abbott describes compliance that ultimately apply to a defence supplier as “non-negotiable.” Although, he added, “You don't have to meet every obligation on day one.”
The challenge is getting the timing right. Investing too early can tie up capital before the commercial case is established. Waiting too long could leave the company without enough time to meet its obligations.
Leadership teams don't need every answer before exploring defence. They should, however, understand the potential requirements, gaps, costs, and timelines well enough to know what success could demand of the organization.
Together, these considerations can help leadership determine whether the business is ready to move forward, needs more time to prepare, or should direct its resources elsewhere.
Not every business should enter defence
The attention surrounding Canada's defence sector can create pressure to move quickly, but a growing market doesn't automatically make it the right market for every business.
Leadership teams need to consider the opportunity in the context of the company's broader strategic direction.
A startup developing dual-use technology may see defence as its primary market. An established manufacturer may be looking to diversify its customer base. Another company could be testing defence as one of several growth opportunities. For a business considering a future sale, developing defence capabilities could form part of a very different long-term strategy.
Is defence intended to become a significant part of the company's business, or is leadership testing it as one of several potential avenues for growth?
That question should influence how much capital, time, and leadership attention the opportunity receives.
It should also force executives to consider what happens if the strategy doesn't develop as planned. Can the technology or manufacturing capability continue serving commercial customers? Does the investment strengthen the core business regardless? Or is the company making a highly specific bet on defence revenue?
By this point, leadership should have enough information to make a more deliberate assessment.
Is your business ready to enter the defence sector?
| Ready | Not ready yet | No go |
|---|---|---|
| ✓ Clear use case | ◐ Opportunity identified, but not fully validated | ✕ No compelling customer need |
| ✓ Customer need validated | ◐ Route to market still developing | ✕ No competitive advantage |
| ✓ Credible route to market | ◐ Operational or capacity gaps remain | ✕ Economics don't work |
| ✓ Can compete and deliver profitably | ◐ Investment requirements need to be addressed | ✕ Required investment doesn't align with strategy |
| ✓ Investment and regulatory requirements understood | ◐ Compliance readiness still in progress | ✕ Defence doesn't support long-term goals |
| Move forward with a defined strategy | Address the gaps before making a larger commitment | Direct capital and attention elsewhere |
A defining moment for Canadian businesses
Canada's defence sector is giving businesses reason to explore opportunities they may not have considered before.
Yurichuk sees a particular moment for Canadian companies.
His optimism comes with a practical message: understand where you fit, get out into the ecosystem, build relationships, and develop a track record by executing well.
Why work with BDO when evaluating defence sector opportunities?
BDO works with more than 250 clients in Canada's defence sector, with experience across the defence ecosystem. We bring together operational, financial, regulatory, cybersecurity, government incentives, and transaction capabilities to help businesses look at the opportunity from multiple angles.
We work with organizations to determine whether defence belongs in your long-term growth strategy, understand what pursuing it would require, and move forward with a clearer view of what comes next.
BDO Cue & A: How Businesses Can Enter Canada’s Defense Sector
