Business & Agriculture Small and Mid-Size Business in Alberta A Changing Landscape Edward Straw, Vice President – Business Solutions, ATB Business & Agriculture

Business & Agriculture

Small and Mid-Size Business in AlbertaA Changing Landscape

Edward Straw, Vice President – Business Solutions, ATB Business & AgricultureApril 10, 2014


Who is ATB Financial?


Staying connected with Alberta’s businesses

75th Anniversary

5,300 Associates

242 Alberta communities


Who is ATB Business & Agriculture?


Here through the ups and downs

Source: Bank of Canada Report C3, August 2012.


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)


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


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


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


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


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


FACTMajority of Alberta SMEs are growing


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”



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.


FACTRunning a Business is harder today than it was 5 years ago


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


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%


“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?”


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?”


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.


FACTMany SMEs are going to change hands in the next 5 years


34% of SME owners plan on exiting their business in the next 5 years


< 12 months4%

1 to 3 yrs13%

4 to 5 yrs17%

6 to 10 yrs19%

10+ yrs41%

Don’t know6%



“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!



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


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.


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”.


FACTTechnology has made a positive impact on business operations


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

POSITIVE IMPACT


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?”


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?”


Best Advice for Start-up Success


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.


Reasons for Becoming an Entrepreneur


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.


Barriers for Growth of Small-Sized Business


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%


Conclusions


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


Questions?

Edward Straw

VP, Strategic Business Solutions

(403) 974-8088 or

[email protected]

mailto:[email protected]

Documents

Business & Agriculture Small and Mid-Size Business in Alberta A Changing Landscape Edward Straw, Vice President – Business Solutions, ATB Business & Agriculture