Business & Agriculture
Small and Mid-Size Business in AlbertaA Changing Landscape
Edward Straw, Vice President – Business Solutions, ATB Business & AgricultureApril 10, 2014
Business & Agriculture
Who is ATB Financial?
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Staying connected with Alberta’s businesses
75th Anniversary
5,300 Associates
242 Alberta communities
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Who is ATB Business & Agriculture?
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Here through the ups and downs
Source: Bank of Canada Report C3, August 2012.
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Alberta Business Landscape
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Make-up of Alberta Businesses
98.1% employ less than 50 people (Small)
Source: Statistics Canada, Business Register (based on business locations), December 2011.
81.6% employ less than 5 people (Micro)
1.8% employ 50 to less than 500 employees (Mid-sized)
Small & Medium Sized Enterprises (SMEs)
Business & Agriculture
49%
26%
24%
Urban area(s) onlyBoth urban and rural areasRural area(s) only
Business Firmographics
Source: ATB Financial, Survey on Alberta SMEs, Dec 2013, with 300 respondents.
Business Location(s)
48% of SMEs only conduct business in
Alberta
Within Alberta
In other parts of Canada
In the US
In international markets outside of Canada or the
US
98%
49%
29%
17%
Business Scope
Change from last quarter
Business & Agriculture
Albertans rank high in Foreign Activities
Source: ATB Daily Economic Comment, Todd Hirsch – March 11, 2014
Canada Atlantic Quebec Ontario Alberta rest of CAN
0
5
10
15
20
25
Companies engaged in activities outside CanadaProduc-tion
Technical
Support
% o
f co
mpa
nies
Source: Statistics Canada, Survey of Innovation and Business Strategy, The Daily Mar. 10, 2014
Business & Agriculture
A very optimistic future
Alberta Economy
84%will be better
off or the same
Your Company
92%will be better
off or the same
“HOW DO YOU THINK… WILL BE SIX MONTHS
FROM NOW?”
Source: ATB Financial, Survey on Alberta SMEs, Dec 2013, 300 respondents.
(±) Change from last quarter
-3 +3
Business & Agriculture
Leading the Country in Retail Spending Growth
Source: ATB Daily Economic Comment, Todd Hirsch – Feb 24, 2014
CAN NF PEI NB NS QC ON MB SK AB BC-2
0
2
4
6
8
10
12
14
16
18
20
Change in Retail Sales vs. Population & Inflation(Dec'10 - Dec'13)
% increase in re-tail sales
% increase in in-flation
Source: Statistics Canada, CANSIM tables 326-0020, 080-0020, and 051-0005
5.5%
% c
hang
e in
thre
e ye
ars
% increase in population
Business & Agriculture
Introducing the ATB Business Beat Indexes
Data time periods: Q1 = Jan 2013, Q2 = May 2013, Q3 = Aug/Sept 2013 & Q4 = Dec 2013.
Source: ATB Financial, Survey on Alberta SMEs 2013.
More optimistic about future performance
Less optimistic about future performance
Index (0-100)
ATB Business Beat Indexes
Q1 2013 Q2 2013 Q3 2013 Q4 201340
45
50
55
60
65
70
7570.2 69.8 69.8
72.3
55.4
59.8
66.2 66.8ATB Busi-ness Index
ATB Economy Index
Business & Agriculture
FACTMajority of Alberta SMEs are growing
Business & Agriculture
Intentional growth is paying off
72% of SMEs are intentionally trying to grow their business.
53% are seeing growth in their business as a result of their efforts.
14% are experiencing ‘organic’ growth.
Downsize your operations and sell assets
Purchase another company
Expand in foreign markets
Purchase/build commercial real estate
Invest in R&D
Commercialize new products or services
Expand in domestic markets
Invest in new IT
Purchase equipment/machinery
9%
10%
13%
14%
21%
29%
39%
42%
55%
OVER THE NEXT 24 MONTHS, DO YOU HAVE ANY PLANS
TO…? “% YES”
Source: ATB Financial, Survey on Alberta SMEs, Dec 2013, 300 respondents.
Business & Agriculture
3 Tips for Intentionally Growing Your Business
24% of SME owner/operators report advertising or marketing is important
Source: ATB Financial, Survey on Alberta SMEs, May 2013, 303 respondents.
19% Develop customer relationships
19% Hire and retain quality employees
“GOOGLE ADVERTISING, ADVERTISING ONLINE. IN OUR BUSINESS, BEING IN FLOWERS PEOPLE WHO WANT TO SEND
FLOWERS DO NOT GO TO YELLOW PAGES, THEY GO ONTO GOOGLE AND TYPE IN FLORISTS IN CALGARY.
”General Manager, Retail Flower Shop, 17 years in business,$500k -< $1MM in revenue.
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FACTRunning a Business is harder today than it was 5 years ago
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Running an SME hasn’t gotten any easier! “DO YOU FEEL IT IS
EASIER OR MORE DIFFICULT TO RUN A SMALL BUSINESS
TODAY THAN IT WAS FIVE YEARS
AGO?”
TODAY5 YEARS
AGO
Source: ATB Financial, Survey on Alberta SMEs, Dec 2013, 300 respondents.
70% say it is more difficult to run a business TODAY
16% say it’s about the same
10% say it was harder 5 YEARS AGO
Don't know
Easier
About the same
More difficult
4%
10%
16%
70%
Business & Agriculture
“JUST TO TRY TO GET PEOPLE, FOR STAFF. NOBODY WANTS TO
BE A TRUCK DRIVER THESE DAYS. THE WOES OF RURAL ALBERTA,
WE JUST DON'T HAVE THE PEOPLE. EVERYBODY WANTS TO BE IN THE CITY. WE HAVE TO COMPETE WITH
ALL THOSE LARGE PLANTS UP AT THE TAR SANDS.
”
Small businesses who report it’s harder point to:
Increased environmental regulations
Margins are smaller/ greater volume needed for same profit
Harder to keep pace with new technology
Harder to retain existing customers
Economy is worse today
Lack of or no access to capital/ capital constrained
More direct competitors
Harder to attract and retain good employees
3%
3%
3%
3%
3%
4%
4%
5%
6%
7%
7%
11%
13%
27%
28%
Owner, Construction business, 50 years in operation,5 to 19 employees,$3M-$5M in revenues.
Source: ATB Financial, Survey on Alberta SMEs, Dec 2013; among those who report it’s MORE DIFFICULT to run a business today (n= 211 ); responses mentioned by 3% or more are shown.
“WHY DO YOU THINK ITS MORE
DIFFICULT TO RUN A BUSINESS
TODAY?”
Business & Agriculture
Small businesses who believe it’s easier mention:
It's easier to market your business
Easier to retain existing customers
Easier access to capital
More people care about supporting local businesses
Economy is better today
Technology advances are making it easier/ more efficient
7%
7%
10%
13%
20%
33%
“THE EASE OF COMMUNICATING AND
TECHNOLOGY HAS MADE IT EASIER TO RUN. WE CAN
COMMUNICATE BETTER WITH OUR CUSTOMERS VIA
THE WEB AND OTHER SOURCES AND THE
OPERATIONS OF THE COMPANY ARE MORE
STREAMLINED BECAUSE THEY ARE MORE COMPUTERIZED.
”
General Manager, Energy or Oil and Gas, 38 years in business,5 to 19 employees,$3M-$5M in revenues.
Source: ATB Financial, Survey on Alberta SMEs, Dec 2013; among those who report it’s EASIER to run a business today (n= 30 ); responses mentioned by 7% or more are shown.
“WHY DO YOU THINK ITS
EASIER TO RUN A BUSINESS
TODAY?”
Business & Agriculture
What are the HR & Labour challenges?
Finding and attracting quality labour
Replacing key employees
Managing young Gen Y workers
Managing current staff/ employee retention
Overall competitive salaries
Offering competitive benefits
Training
High employee turnover
Replacing retiring employees
Supporting or managing a mobile workforce
Payroll management
Employee theft
86%
69%
58%
54%
44%
39%
33%
31%
28%
23%
11%
11%
Source: ATB Financial, Survey on Alberta SMEs, January 2013, with 147 respondents reporting the area of HR/Labour is the most difficult.
Business & Agriculture
FACTMany SMEs are going to change hands in the next 5 years
Business & Agriculture
34% of SME owners plan on exiting their business in the next 5 years
Source: ATB Financial, Survey on Alberta SMEs, May 2013, 303 respondents.
< 12 months4%
1 to 3 yrs13%
4 to 5 yrs17%
6 to 10 yrs19%
10+ yrs41%
Don’t know6%
Business & Agriculture
Source: ATB Financial, Survey on Alberta SMEs, May 2013, 303 respondents.
“No time to deal with the issue”“Have not thought about it”“Don’t know where to start”“It is too far in the future”“Have not decided what to do with business”
52% of SMEs expecting to be sold, transferred, or wound down (in the next 5 years) DO NOT have a succession plan!
Business & Agriculture
Source: ATB Financial, Survey on Alberta SMEs, May 2013, 303 respondents.
Other/ Don't know
Wind down or close the business
Sell/ transfer to a family member
Sell the company to existing management or other employees
Sell the company to a third party
4%
17%
17%
35%
48%
48% of SMEs expecting to be sold, transferred, or wound down in the next 5 years (with a succession plan) expect to sell to a third party
Business & Agriculture
Boomer Businesses are Booming!
29% of SME owner/operators report being 55+ years of age.
55% of Alberta SMEs owners/operators (aged 55+) do not have a succession plan.
Source: ATB Financial, Survey on Alberta SMEs, May 2013, 303 respondents.
35% of Alberta SMEs owners/operators (aged 55+), who do not have a succession plan, report having “no plans to let go of the business”.
Business & Agriculture
FACTTechnology has made a positive impact on business operations
Business & Agriculture
Technology has improved business operations
“WOULD YOU SAY TECHNOLOGY HAS
HAD A POSITIVE OR NEGATIVE IMPACT
ON YOUR BUSINESS OPERATIONS OVER
THE LAST FIVE YEARS?”
Source: ATB Financial, Survey on Alberta SMEs, Dec 2013, 300 respondents.
Positive Impact
Negative Impact
No Impact
87%
12%
5%
Multiple Mentions
“IT'S MORE EFFICIENT, THERE'S LESS ERRORS DUE TO
PENMANSHIP. BETTER CLARIFICATION OF IDEAS.
IMPROVEMENTS TO PATIENT CARE, WE NO LONGER HAVE
THAT LACK OF COMMUNICATION, LACK OF
UNDERSTANDING DUE TO
CLERICAL ERRORS. ”Clinic Manager, Health Care, 25 years in business,1 to 4 employees,Undisclosed revenues.
POSITIVE IMPACT
Business & Agriculture
Technology’s POSITIVE impact
Better reporting/ info management
File management/ document storage
More connected to customers
Remote access to information - mobile workforce
Access to new markets/ business
Increase productivity/ efficiency
Ability to advertise online
Greater market presence
Better tools to manage the business/ cash flow
Easier access to information
Ability to do work faster/ easier
Ability to streamline business processes
Easier to communicate
3%
3%
4%
5%
5%
5%
6%
6%
8%
12%
13%
17%
18%
“EASIER TO COMMUNICATE WITH CUSTOMERS, THROUGH
EMAIL, THROUGH SOCIAL MEDIA, THROUGH WEBSITE
CONNECTIONS.
”Owner, Wholesale business, 32 years in business,5 to 19 employees,$1M-$3M in revenues.
Source: ATB Financial, Survey on Alberta SMEs, Dec 2013; among those who report technology has had a POSITVE impact on their business (n=259); responses mentioned by 3% or more are shown.
“WHY DO YOU THINK TECHNOLOGY HAS HAD A
POSITIVE IMPACT ON YOUR BUSINESS?”
Business & Agriculture
Technology’s NEGATIVE impact
Technology not always reliable
Systems not compatible/ don't work together
More complex/ difficult to work with
Time and money required to keep up with changing environment
Suppliers/ customers demanding electronic interactions
Higher cost of technology upgrades
Greater competition
5%
5%
8%
8%
11%
16%
22%
“BECAUSE OF THE ONLINE RETAILERS. THEY CHECK THE
PRICING ON ONLINE RETAILERS, THEY COME INTO
YOUR STORE TO ACTUALLY LOOK AT IT. FEEL IT, TOUCH IT, HOLD IT. BUT THEN THEY
GO BACK TO THE ONLINE RETAILER THAT DOESN'T
HAVE THE RENT AND STAFFING CHARGES AND
THEY BUY IT FROM THEM. THAT'S A NEW THING THAT'S
CAME ON IN THE LAST 5 YEARS THAT WE'RE HAVING
TO GRAPPLE WITHQUOTE.
”
Owner, Retail business, 19 years in business,5 to 19 employees,$1M-$3M in revenues.
Source: ATB Financial, Survey on Alberta SMEs, Dec 2013; among those who report technology has had a NEGATIVE impact on their business (n=37); responses mentioned by 5% or more are shown.
“WHY DO YOU THINK TECHNOLOGY HAS HAD A
NEGATIVE IMPACT ON YOUR BUSINESS?”
Business & Agriculture
Best Advice for Start-up Success
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Best advice for start-up success from established businesses
Source: ATB Financial, Survey on Alberta SMEs, Aug/Sept 2013, 300 respondents, responses mentioned by 3% or more are shown.
Find your niche in a sizeable market
Design a sound business plan (and stick with it)
Surround yourself with good people in your network
Set realistic expectation
Don't give up/ be positive
Don't grow too quickly/ start small
Hire and maintain good staff
Keep expenses low/ no debt
Research the marketplace
Keep cash flowing/ watch cash flow carefully
Focus on employees & client satisfaction
4%
5%
6%
6%
6%
10%
10%
11%
15%
16%
16%
“MANAGE CASH FLOW, BECAUSE IT'S
YOUR LIFELINE. IF YOU HAVE NO CASH THEN
YOUR BUSINESS IS DONE PRETTY QUICKLY.
”CFO, Energy/Oil & Gas
Company, 10 years in business,
$20MM+ in revenues.
Business & Agriculture
Reasons for Becoming an Entrepreneur
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What I love about owning/ running/ being responsible for an independent business is…
47% of SME owner/operators report … The ability to make my own decisions
Source: ATB Financial, Survey on Alberta SMEs, Aug/Sept 2013, 98 respondents.
13% Control over own business
12% Flexibility of hours
“I LIKE TO BE ABLE TO CONTROL WHAT HAPPENS IN THE BUSINESS AND WITH OWNING A BUSINESS YOU
HAVE SOME CHOICES AND FREEDOMS AND ARE IN CONTROL OF YOUR OWN DESTINY.
”Pharmacy Owner35 years in business,$1MM - $3MM in revenue.
Business & Agriculture
Barriers for Growth of Small-Sized Business
Business & Agriculture
Uncovering the greatest barriers to grow for small-sized businesses
Limited product/service differentiation from competitors
Limited in-house marketing expertise
Cost of labour
Poor sales or weak market conditions
Inadequate cash flow or poor cash flow management
Limited access to capital or additional financing
3
1
3
4%
4%
3
5%
7%
6%
10%
12%
28%
1
5%
3
2
4%
6%
5%
4%
7%
7%
8%
19%
Biggest Challenge 2nd Most Difficult
Source: ATB Financial, Survey on Alberta SMEs, Aug/Sept 2013, 300 respondents, total responses mentioned by 4% or more are shown..
47%20
%
11%10%9%
6%
8%
17%13
%
6%
6%4%
Business & Agriculture
Conclusions
Business & Agriculture
A large wave of business succession is coming.
Majority of small businesses say it’s harder to run a business today than five years ago.
Investments in technology are yielding positive changes for business operations.
1
2
3
Key Insights
Business & Agriculture
Questions?
Edward Straw
VP, Strategic Business Solutions
(403) 974-8088 or