1 Alberta Business Beat Volume 4, February 2014. 2 Background and Methodology

1

Alberta Business BeatVolume 4, February 2014

2

Background and Methodology

3

Business & Agriculture

Background & Objectives

Background• ATB Financial commissioned NRG Research Group to conduct a survey of 300

randomly selected small- to medium-sized businesses in Alberta each quarter, beginning in Q1 2013.• The purpose of the study is to gain an understanding the challenges faced by

small- to medium-sized businesses in Alberta, and to track confidence in the business climate in Alberta.

Research Objectives»Measure business owners and managers’ perceptions of the current

business climate compared with six months ago, as well as their assessments of what the business climate will be like six months from now;»Understand how small to medium-sized business are using technology

and how it has impacted their business operations; »Determine their go-to sources for advice and guidance when making

technology-based decisions; »Assess the current and future importance of online sales;»Gauge the likelihood of their company’s future investment plans; and,»Profile the firmographics as well as respondent demographics for small-

to medium-sized businesses in Alberta.

4


Methodology

• Randomly selected Alberta SME’s

Qualifying Businesses

< 500 employees<$20 million

annual revenuesMust be financial

decision makers or influencers• Excluded

agriculture, government,

financial institutions, media,

market research, PR, advertising

and communications

sectors

Field dates:Dec 10 – 20, 2013

Telephone + online option

• Over 3,000 businesses contacts

made and 300 completed the

survey• Margin of error is

+/- 5.8%

5


ATB – Business Optimism Index grew this quarter to its highest level this year.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

6

Business Confidence

7


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.

8


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 Index

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 66.8

ATB Business Index

ATB Economy Index

9


Introducing the ATB Business Beat Indexes - Energy





Index (0-100)

ATB Business Beat Indexes

Q1 2013 Q2 2013 Q3 2013 Q4 201440

45

50

55

60

65

70

75

80

85

90

70.2 69.869.8

72.3

69.1

77.8 78.8

72.2

55.4 59.8

66.266.8

54.2

67.6

72.1

68.9

Energy

ATB Business Index

ATB Business Index (Energy)

ATB Economy Index

ATB Economy Index (Energy)

10


Introducing the ATB Business Beat Indexes – Retail





Index (0-100)


Q1 2013 Q2 2013 Q3 2013 Q4 201440

45

50

55

60

65

70

75

80

85

90

70.2

69.8 69.8 72.370.7

63.866.0

77.5

55.4

59.8

66.2 66.859.1

50.0

67.7 68.3

Retail

ATB Business Index

ATB Business Index (Retail)

ATB Economy Index

ATB Economy Index (Retail)

11


Introducing the ATB Business Beat Indexes - Construction





Index (0-100)


Q1 2013 Q2 2013 Q3 2013 Q4 201440

45

50

55

60

65

70

75

80

85

90

70.2 69.8

69.872.3

72.2

85.2

69.5

73.7

55.4 59.8

66.266.8

54.1

78.6

65.5

68.4

Construction

ATB Business Index

ATB Business Index (Con-struction)

ATB Economy Index

ATB Economy Index (Con-struction)

12

Business Growth

13


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”


14

How Running a Small Business Has Changed in the last Five Years

15


Running a 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


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%

16


“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

More competition from foreign suppliers

Margins are smaller/ greater volume needed for same profit

Less people care about supporting local businesses

Harder to keep pace with new technology

More competition from big business domestically

Harder to retain existing customers

Technology advances making it more difficult/ less efficient

Economy is worse today

More taxes

Lack of or no access to capital/ capital constrained

Higher costs

More direct competitors

Increased governmental regulations

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?”

17


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?”

18

Technology investments made

19


Main technology investments “DOES YOUR COMPANY PLAN TO INVEST IN … IN THE NEXT 12 MONTHS?”


Software

Hardware

Website Social

media

45% 43% 40% 30%

A total of 73% report having plans to invest in technology in the next 12

months.

20


IT human resources investments“DOES YOUR COMPANY PLAN TO INVEST IN … IN THE NEXT 12 MONTHS?”


Internal personnel or training in IT

External help in IT

31%

31%

21


Capital investment in technology is growing considerably

“COMPARED TO A YEAR AGO,

WOULD YOU SAY THE AMOUNT OF CAPITAL YOUR

BUSINESS SPENDS ON

TECHNOLOGY-RELATED

PROJECTS HAS …?”

“HOW ABOUT COMPARED TO 5

YEARS AGO?”

Series1 5%

59%

30%

6%

Series16%

17%

35%

35%

LAST YEAR5 YEARS AGO


Increased Significantl

yIncreased Somewhat

Remained the same

Decreased

22


Time spent on technology-related projects is also growing considerably


WOULD YOU SAY THE AMOUNT OF

TIME YOUR BUSINESS

SPENDS ON TECHNOLOGY-

RELATED PROJECTS HAS

…?”


YEARS AGO?”

Series1 2%

47%

40%

11%

Series16%

18%

26%

45%




yIncreased Somewhat

Remained the same

Decreased

23

Technology’s impact on Small Businesses

24


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?”


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.QUOTE.

”Clinic Manager, Health Care, 25years in business,1 to 4 employees,Undisclosed revenues.

POSITIVE IMPACT

25


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?”

26


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?”

27

Technology solutions being used

28


High-level technology solutions being used


Productivity tools or software

Series1

11%

16%

21%

22%

23%

26%

27%

29%

30%

34%

34%

70%

77%

89%

2%

12%

6%

7%

10%

5%

5%

5%

5%

5%

4%

1%

Currently usingThinking about us-ing

Other

Financial accounting systems

Data protection or cyber security

Email marketing

Mobile workforce

Business analyticsInventory or supply chain mgmt

systemBusiness continuity or disaster

recoveryCloud services

CRM software

Online customer surveys

Mobile app developmentERP enterprise resource

planning

89%

78%

74%

39%

39%

35%

34%

32%

36%

30%

28%

33%

18%

11%

29


Go-to sources for advice on technology

Industry trade shows

Other staff

Myself

Word of mouth

Technology solution vendor

Accountant

Business owners/ partners

Internet search engines

Members of your business network

Technical expert/ dedicated employee internally

Friends and family

Colleagues

External IT contractor or consultant

2%

3%

4%

5%

5%

6%

6%

10%

10%

11%

13%

18%

45%

Source: ATB Financial, Survey on Alberta SMEs, Dec 2013, 300 respondents; responses mentioned by 2% or more are shown.

30


Time spent online with a smartphone or tablet is growing

“WHAT PERCENTAGE OF

THE TIME YOU SPEND ONLINE FOR BUSINESS PURPOSES IS

USING A SMARTPHONE OR TABLET?”

“HOW ABOUT LAST

YEAR?”

Series1 39%

41%

13%

7%

Series142%

43%

11%

3%

TODAYLAST YEAR


More than 50%

25-50%

Less than 25%

None

MEAN15%

MEAN12%

31

Corporate website usage

32


Corporate website usage and purpose

75% of SMEs have a corporate website.

E-commerce

Online business brochure or catalog

Informational purposes

17%

49%

92%

“WHAT IS THE MAIN PURPOSE OF YOUR BUSINESS’ WEBSITE?”

Source: ATB Financial, Survey on Alberta SMEs, Dec 2013; among those who report having a business website (n=225).

33


Capital spent on the website has grown considerably


WOULD YOU SAY THE AMOUNT OF CAPITAL YOUR

BUSINESS SPENDS ON ITS WEBSITE HAS

…?”


YEARS AGO?”

Series1 5%

61%

21%

12%

Series16%

22%

29%

37%


Source: ATB Financial, Survey on Alberta SMEs, Dec 2013; among those who report having a business website (n=225).


yIncreased Somewhat

Remained the same

Decreased

34


Developing an online sales channel

Don't know

More than 5 years

In the next 2 to 5 years

In the next year

It currently is

6%

38%

32%

14%

9%

Source: ATB Financial, Survey on Alberta SMEs, Dec 2013; among those who report having an e-commerce website (n=34).

“IF YOU THOUGHT OF YOUR ONLINE

SALES AS COMING FROM A SINGLE

LOCATION, AT WHAT POINT WOULD YOU SEE IT BECOMING

YOUR BEST LOCATION?”

35


Percentage of online sales shows growth

“WHAT PERCENTAGE OF YOUR OVERALL

SALES IS GENERATED

FROM ONLINE SALES?”“HOW

ABOUT A YEAR AGO?”

Series1 10%

8%

54%

13%

15%

Series110%

21%

49%

5%

15%

TODAY1 YEAR AGO

51% or more

26-50%

25% or less

Don’t know

MEAN26%

MEAN21%

Source: ATB Financial, Survey on Alberta SMEs, Dec 2013; among those who report having an e-commerce website (n=39).

None

36

Social media usage

37


Social media usage and purpose

Among SMEs who are currently using social media:• 96% use Facebook

• 55% Twitter

• 44% LinkedIn

• 14% Instagram • 12% Pinterest

• 3% Youtube

• 2% Google+Raising profile of company owners/ leaders

Connecting/ understanding your customers

Generating sales/ leads

To keep up with everyone else

Getting messages out to customers

Engaging in conversations with customers

Getting promotions out to customers

Generating new clients

Advertising

Raising profile of the company

Informing customers

3%

6%

6%

7%

7%

7%

9%

10%

12%

17%

29%

“WHAT IS THE MAIN REASON YOUR BUSINESS USES SOCIAL MEDIA?”

Source: ATB Financial, Survey on Alberta SMEs, Dec 2013; among those who report using social media (n=105).

38


Social media usage is growing quickly

USAGE TODAY: “Does your business use social media or make social media postings?”ONE YEAR AGO: “Did your business use social media a year ago?”

THREE YEARS AGO: “How about three years ago?”

Source: ATB Financial, Survey on Alberta SMEs, Dec 2013; among those who report using social media (n=105).

31% plan on using social media more in the upcoming year.

3 Years Ago 1 Year Ago Currently Use0%

10%

20%

30%

40%

8%

23%

35%

Social Media Usage

39


Online content owners varies

WEBSITE’S CONTENT

COMPANY’S SOCIAL MEDIA

POSTINGS

Series1 13%

33%

52%

54%

55%

Series119%

14%

64%

13%

55%

WEBSITESOCIAL MEDIA

Company owners/ partners

Designated employee(s)

All employees

Source: ATB Financial, Survey on Alberta SMEs, Dec 2013; among those who report having a (n=225) or among those who report using social media or make social media postings (n=105).

Contracted/ part-time

External company, contractor or consultant(s)

“Which of the following people play an integral role in creating and managing your …?”

40

APPENDIX: Firmographics & Respondent Demographics

41


Half of Alberta SMEs earn revenues in excess of $1,000,000

Source: ATB Financial, Survey on Alberta SMEs, Dec 2013, with 300 respondents.

Of the SMEs we surveyed, nearly half report fewer than five employees, half

(49%) report earnings in excess of $1,000,000 in 2012.

45%

47%

8%0 to 4 'Micro'5 to 49 'Small'50 to 499 'Med'

18%

15%

18%

18%

21%

10% < $250k$250-500k$500k-<$1MM$1-<$3MM$3-<$10MM$10MM+

Number of Employees

Annual Revenues 2012

Change from last quarter

42



Business FirmographicsBusiness Life Stage

PhaseIntentional

GrowthStart-up

Initial Growth

Established

Expansion

Mature

Winding Down

3%

10%

41%

18%

21%

6%

Intentional Growth

Organic Growth

No Growth, but Trying

No Growth, NOT Trying

53%

14%

20%

13%

72% of SMEs are TRYING to

grow their business


43


Less than 5 years

6 to 10 years

11 to 15 years

16 to 20 years

Over 20 years

10%

13%

15%

12%

50%

No borrowing needs

Less than $1MM

$1 to < $3MM

$3 to < $10MM

$10MM+

Don't know/Refused

50%

39%

5%

2%

2%

3%

Business Firmographics


$1MM+

8%

Borrowing Needs

# of Years in Operation

MEAN26

years


44



Source: ATB Financial, Survey on Alberta SMEs, Dec 2013, with 300 respondents, responses mentioned by 4% or more are shown.

Industry

Retail Trade

Construction

Energy/ Oil & Gas

Prof, Sci & Tech

Transp/ Warehouse

Manufacturing

Wholesale Trade

Arts, Entertain & Rec

Information & Comm

Business Services

20%

15%

14%

7%

5%

5%

4%

4%

4%

4%

Franchise Industry (n=27)Automotive 10

Retail 5

Food Services 3

Energy/ Oil & Gas Services 2

Business Services 1

Travel, Leisure & Accommodation

1

Beauty & Fitness 1

Home Improvement Services

1

Other 3

9% of SMEs are

franchises


45


49%

26%

24%

Urban area(s) onlyBoth urban and rural areasRural area(s) only



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


46




Yes

No

59%

41%

Does your business have a store front?


47


Respondent Demographics

Source: ATB Financial, Survey on Alberta SMEs, Dec 2013, with 300 respondents, responses mentioned by 4% or more are shown.

Owner/ Operator

General Manager (GM) or Office Manager

Chief Executive Officer (CEO) or President

Managing Director, Senior Director or Director

Senior Manager or Manager

Chief Financial Officer (CFO)

Controller

51%

19%

15%

7%

4%

4%

4%

18-34

35 to 44

45 to 54

55 to 64

65+

12%

19%

33%

28%

11%

39%55+Title/ Role Age


48


Male64%

Female

36%

37%

51%

12%

Sole decision-makerShares responsibilityInfluences decisions

Respondent Demographics


Role in Financial Decisions

Gender


49


Documents

1 Alberta Business Beat Volume 4, February 2014. 2 Background and Methodology