Alberta Business Beat Volume 1, March 2013. Background and Methodology

Alberta Business BeatVolume 1, March 2013

Background and Methodology

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 Q4-FY2013.• 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 internal and external factors that may impact small- to

medium-sized businesses in Alberta, such as reliance on the price of natural resources or the challenges of various areas of business management; »Gauge the likelihood of investment plans in a number of different areas,

such as investment in technology or expansion into new foreign or domestic markets;»Understand potential challenges for small- to medium-sized businesses in

growing their businesses; and,»Profile the firmographics as well as respondent demographics for small-

to medium-sized businesses in Alberta.


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:January 22-31,

2013

Telephone + online option

• Over 3,000 businesses contacts

made and 303 completed the

survey• Margin of error is

+/- 5.8%

Key Insights


Key Insights

Optimism remains high despite talk of the ‘bitumen bubble’.

Alberta’s population is growing quickly and there is still a skilled labour gap.

There a need for succession planning in Alberta.

Detailed Findings

Alberta Business Landscape


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 Confidence


Optimistic about the future

Alberta Economy

76%will be better off or the

same

Your Company

87%will be better off or the

same

86% of Alberta SMEs agree their business success is tied to the Alberta economy

“HOW DO YOU THINK …………… WILL BE SIX MONTHS FROM NOW?”

Source: ATB Financial, Survey on Alberta SMEs, January 2013, 303 respondents.


The price of oil and gas has a direct impact on a SME’s business success

the price of a barrel of oil

the price of a natural gas

70%

48%

% AGREE THE SUCCESS OF

THEIR BUSINESS IS TIED TO ……



Energy patch optimism

$48.24 billion in capital in 2013

Last energy boom in 2006-08

Since survey, weaker energy

prices

Source: Statistics Canada, CANSIM table 029-0005.

Business Growth


Intentional growth is paying off

7 in 10 of SMEs are intentionally

trying to grow their business.

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

10%

16%

17%

19%

28%

39%

40%

63%

OVER THE NEXT 24 MONTHS, DO YOU HAVE ANY

PLANS TO…? “% YES”

48% are seeing growth in their business as a result of their

efforts.16% are

experiencing ‘organic’ growth.


Business Challenges


Challenges for small & mid-size business

Source: ATB Financial, Annual Business Banking Survey, March 2012.


Where do SMEs spend their time?

Sales &

Cus

tom

er A

cquisit

ion

Human

Res

ourc

es &

Lab

our

Mar

ketin

g, A

dver

tising

& PR

Stra

tegy

& Fut

ure

Plan

ning

Accou

nting

Info

rmat

ion

Tech

nology

Opera

tions

Man

agem

ent

Risk M

anag

emen

t

Building

& Offi

ce A

dmin

-5%

0%

5%

10%

15%

20%

25%

30%Most Time Spent Most Important Most Difficult



What is causing them grief?

Building & Office Admin

Risk Management

Accounting

Marketing, Advertising & PR

Operations Management

IT (hardware & software)

Strategy & Future Planning

Sales & Customer Acquisition

Human Resources & Labour

3%

7%

7%

8%

7%

10%

12%

16%

27%

4%

5%

8%

8%

10%

8%

13%

10%

22%

1st Most Difficult 2nd Most Difficult


49%

26%

17%

16%

15%

7%

12%

25%

18%


Alberta’s population is growing

Source: Statistics-Canada, The Daily, Mar. 20, 2013.

Alberta’s population grew by 3.0 per cent; more than double the national average (1.1 per cent).

Doesn’t this indicate Alberta has a strong labour market?.


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, Survey on Alberta SMEs, Jan 2013, with 147 respondents reporting HR & Labour is the most/ second most difficult.


What are the Sales & Customer Acquisition challenges?

Source: ATB, Survey on Alberta SMEs, Jan 2013, 78 respondents reporting Sales & Customer Acquisition is the most/ second most difficult.

Competition from large businesses

Seasonality

Competition from other small businesses

Lead generation

Customer retention

Up-selling and cross-selling existing customers

49%

49%

45%

35%

35%

31%


What are the Strategy & Future Planning challenges?

Source: ATB, Survey on Alberta SMEs, Jan 2013, 75 respondents reporting Strategy & Future Planning is the most/ second most difficult.

Managing growth and expansion

Focusing business efforts

Succession planning

Product or market diversification

Creating partnerships

Entering emerging or international markets

71%

36%

35%

31%

13%

13%


Succession planning and Baby Boomers

Sources: 1. ATB, Survey on Alberta SMEs, Jan 2013, 303 respondents & 2. ATB Customer Advisory Panel, Feb/Mar 2013, 284 business panelists.

42% of SME owner/operators report being 55+ years of age1.

Are Alberta SMEs ready for their succession?

=> Their businesses are 2-5 times more likely to be in the Mature or Winding Down phases.

48% of ATB Customer Advisory Panel business panelists (aged 55+) do not have a succession plan2.


What are the IT (hardware & software) challenges?

Source: ATB, Survey on Alberta SMEs, Jan 2013, 55 respondents reporting the area of IT is the most/ second most difficult.

Keeping up with new technology

Software or equipment upgrades

Durable IT or equipment malfunction

Maintaining website, blog, or other digital properties

Integrating disparate systems

Data security

Viruses and other threats

Data storage

Mobile computing

CRM software

75%

65%

53%

49%

44%

33%

29%

29%

25%

16%


What are the Operations Management challenges?

Source: ATB, Survey on Alberta SMEs, Jan 2013, 50 respondents reporting Operations Management is the most/ second most difficult.

Inventory management

Meeting service level agreements

Coordinating across internal groups

Product transportation costs

Product innovation

38%

34%

32%

30%

28%

26%

26%

14%

14%


What are the Marketing, Advertising and Public Relations challenges?

Source: ATB, Survey on Alberta SMEs, Jan 2013, 49 respondents reporting the area of Marketing, … is the most/ second most difficult.

Designing creative for marketing/ advertising

Marketing using social media

Selecting marketing channels

Networking and driving word-of-mouth

Reputation management

Community engagement

Website development & optimization

Search engine optimization (SEO)

Search engine marketing (SEM)

Market segmentation

49%

45%

45%

43%

41%

39%

35%

35%

33%

29%


What are the Accounting challenges?

Source: ATB, Survey on Alberta SMEs, Jan 2013, 45 respondents reporting the area of Accounting is the most/ second most difficult.

Filing taxes and related administra-tive tasks

Late payments from customers

Inflation

Securing capital/ financing

Debt management

High interest rate on credit

Fluctuating currency values

64%

38%

27%

18%

18%

16%

16%


What are the Risk Management challenges?

Source: ATB, Survey on Alberta SMEs, Jan 2013, 37 respondents reporting Risk Management is the most/ second most difficult.

Staying up-to-date on legislative and regulatory changes

Other industry-specific risks

Mitigating or managing employee-related liability

Legal costs

Loss prevention (theft)

Intellectual property protection

Fraud protection

Disaster recovery planning

57%

41%

27%

27%

24%

16%

11%

11%


What are the Building & Office Admin challenges?

Source: ATB, Survey on Alberta SMEs, Jan 2013, 22 respondents reporting Building & Office Admin is the most/ second most difficult.

Office real estate (e.g., rent cost too high, finding appropriate space)

Cost of utilities

Cost of property insurance

Managing travel costs/ requirements

Office furniture not functional or flexible

Ordering office equipment or supplies

Shipping and mailing

45%

32%

32%

14%

14%

9%

5%

http://www.canequity.com/blog/2012-07-canadian-commercial-real-estate-in-a-tight-spot/

Questions?

APPENDIX: Business Firmographics & Respondent Demographics


Majority of Alberta SMEs earn revenues in excess of $500,000

Source: ATB Financial, Survey on Alberta SMEs, January 2013, with 303 respondents.

Of the SMEs we surveyed, more than half have fewer than five

employees, over six in ten (61%) report earnings in excess of

$500,000 in 2012.

54%39%

7%

0 to 4 'Micro'

5 to 49 'Small'

22%

17%

13%19%

17%

13%

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

Number of Employees

Annual Revenues 2012



Business FirmographicsBusiness Life Stage

PhaseIntentional

GrowthStart-up

Initial Growth

Established

Expansion

Mature

Winding Down

4%

9%

39%

17%

20%

10%

Intentional Growth

Organic Growth

No Growth, but Trying

No Growth, NOT Trying

48%

16%

21%

13%

69% of SMEs are TRYING to

grow their business


1 to 5 years

6 to 10 years

11 to 15 years

16 to 20 years

Over 20 years

11%

13%

17%

14%

45%

No borrowing needs

Less than $1MM

$1 to < $3MM

$3 to < $10MM

$10MM+

Don't know/Refused

47%

36%

7%

3%

3%

5%

Business Firmographics


$1MM+

13%

Borrowing Needs

# of Years in Operation

MEAN24

years



Source: ATB Financial, Survey on Alberta SMEs, January 2013, with 303 respondents, responses mentioned by 3% or more are shown.

Industry

Energy/ Oil & Gas

Construction

Prof, Sci & Technical

Manufacturing

Transp/ Warehouse

Education

21%

16%

14%

6%

6%

4%

4%

3%

3%

3%

3%

Franchise Industry (n=22)Automotive 4

Retail 4

Beauty & Fitness 2

Energy/ Oil & Gas Services 2

Financial Services/ Insurance

2

Health 2

Travel, Leisure & Accommodation

2

Non-profit 2

Education 1

Food Services 1

7% of SMEs are

franchises


47%

28%

26%

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



Business Location(s)

53% of SMEs only conduct business in

Alberta

Within Alberta

In other parts of Canada

In international markets outside

of Canada

97%

43%

24%

Business Scope


Respondent Demographics

Source: ATB Financial, Survey on Alberta SMEs, January 2013, with 303 respondents, responses mentioned by 3% or more are shown.

Owner/ Operator

General Manager (GM) or Office Manager

Chief Executive Officer (CEO) or President

Senior Manager or Manager

Managing Director, Senior Director or Director

Controller

Chief Financial Officer (CFO)

Bookkeeper

48%

19%

15%

6%

5%

5%

5%

3%

18-34

35 to 44

45 to 54

55 to 64

65+

10%

21%

27%

29%

13%

42%55+Title/ Role Age


Male

67%

Female

33%40%

48%

12%

Sole decision-makerShares responsibilityInfluences decisions

Respondent Demographics


Role in Financial Decisions

Gender

ATB Business BeatEmail: [email protected]: atb.com/businessbeat

Documents

Alberta Business Beat Volume 1, March 2013. Background and Methodology