Alberta Business Beat

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Alberta Business BeatVolume 5, April 2014

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Background and Methodology

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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 these studies 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 the need of cash flow management and the habits and tools

business owners use to maintain an understanding of their company’s financial management. »Explore gender differences when it comes to managing their business,

cash flow management and future investment plans; and,»Profile the firmographics as well as respondent demographics for small-

to medium-sized businesses in Alberta.

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Methodology

• 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:Mar 19 - Apr 1, 2014

• Telephone• Over 3,000 businesses

contacts made and 300 completed the survey

• An oversample of 100 female entrepreneurs

were added for all gender comparisons

• Margin of error is +/- 5.8%

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ATB – Business Optimism Index grew again this quarter to reach a new record!

Majority of small businesses do not prepare cash flow projections, but are impacted by seasonal cash flows.Female entrepreneurs generally approach business in similar ways to their male counterparts; although there are some subtle differences.

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Key Insights

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Business Confidence

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A very optimistic future

Alberta Economy

89%will be better off or the

same

Your Company

95%will be better off or the

same

“How do you think… will be six months from now?”

Source: ATB Financial, Survey on Alberta SMEs, Mar 2014, 300 respondents.

(±) Change from last quarter

+2+5

94% FEMALE

96% MALE

91% FEMALE

88% MALE

54% better/

somewhat better

65% better/

somewhat better

46% better/

somewhat better

50% better/

somewhat better

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Cash Flow Management

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What are the main issues SMEs face with their cash flow management?

Banking (securing credit/loans)

Rising overhead costs

Seasonal nature of the business

Government bureaucracy (ex, taxes)

Timely & organized financial administration

Increasing sales/ client acquisition

Access/ availability of cash flow

Accounts Receivables being paid on time

5%

6%

6%

7%

7%

12%

19%

24%

“TIMING FOR THE RECEIVABLES AND

PAYABLES. CUSTOMERS ARE TAKING 45-50 DAYS TO PAY. SO IT IS HARD TO PAY THE

PAYABLES, WHEN THE RECEIVABLES ARE NOT

COMING IN QUICK ENOUGH.

”Vice President, Retail Trade, 38 years in business,20-50 employees,$3M to $5M in revenues.

Source: ATB Financial, Survey on Alberta SMEs, Mar 2014; among those who report having a main issue with their business’ cash flow management (n= 216; DKs removed); responses mentioned by 5% or more are shown.

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Seasonality impacting cash flow

63% of SMEs report seasonality affects their cash flows.

Nothing

Use slow period to plan ahead for busy season

Line of credit

Offer more promotions/ incentives/ advertising

Keep overhead costs low

Layoffs/ cut staffing

Use savings/ cash reserves

Budget during busy season to manage low season

6%

3%

4%

6%

10%

11%

15%

52%

HOW DO YOU MANAGE THROUGH IT?

Source: ATB Financial, Survey on Alberta SMEs, Mar 2014; among those who report seasonality affects their cash flows (n= 190 ); responses mentioned by 3% or more are shown.

Industries that appear most impacted by seasonality include:• Retail Trade,• Construction,• Automotive & • Arts/Entertainment &

Recreation.

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Less than half of all SMEs prepare cash flow projections.

42% of SMEs prepare cash flow projections.

Other

12 months

6 months

3 months (1 quarter)

1 month or less

11%

40%

8%

19%

22%

“OVER WHAT TIME PERIOD DO YOU FORECAST YOUR CASH FLOWS?”

Source: ATB Financial, Survey on Alberta SMEs, Mar 2014; among those whose businesses prepare cash flow projections (n=124).

49%

SMEs in the Start-up (100%) or Expansion Phases (56%) are the most likely to be forecasting their cash flows.

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How often are cash flow projections revised?

Other

Annually

Quarterly/ semi-annually (2x per year)

Monthly

Weekly/ bi-monthly (2x per month)

13%

22%

31%

25%

9%


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What tool(s) are being used for cash flow management?

Other

Custom in-house software

Excel spreadsheets

Basic accounting software (eg, QuickBooks/ Simply

Accounting)

8%

19%

25%

48%


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Who is responsible for developing the cash flow projections?

Source: ATB Financial, Survey on Alberta SMEs, Mar 2014; among those whose businesses prepare cash flow projections (n=126); responses mentioned by 4% or more are shown.

Owner/ Operator

Chief Executive Officer (CEO) or President

General Manager (GM) or Office Manager

Accountant

Controller

Chief Financial Officer (CFO)

Managing Director, Senior Director or Director

41%

13%

12%

12%

10%

5%

4%

91% of the cash flow forecasts are being done in-house (versus 9% who use outside help).

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Who is responsible for the day-to-day management of your cash flow or position?

Source: ATB Financial, Survey on Alberta SMEs, Mar 2014; among those whose businesses prepare cash flow projections (n=126); responses mentioned by 4% or more are shown.

Owner/ Operator




Controller

Accountant

Senior Manager or Manager

Administrator

40%

19%

10%

8%

8%

7%

6%

4%

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How often is the cash balance or position being monitored?

Quarterly or less frequently

Monthly

Weekly/ several times per month

Daily/ several times per week

6%

23%

29%

42%


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Female vs Male Entrepreneurs

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Just how different are women and men entrepreneurs? (Summary)

FEMALEMALE

Source: ATB Financial, Survey on Alberta SMEs, Mar 2014; among female (n=219) and male (n=181) respondents.

Own/operate a small business with 5 to 49 employees (50% vs. 34% females).

Own/operate a micro-business with 0 to 4 employees (57% vs. 43% males).

Spend most of their time managing their business’ operations (33% vs. 21% females).

Be more optimistic about their company’s future (65% ‘much/somewhat better off’ vs. 54% males).

Consider the most important aspect of running their business to be operations (18% vs. 8% females).

Spend most of their time with strategy/future planning (10% vs. 4% males), accounting (10% vs. 4% males) and administration (8% vs. 2% males).

Have the most difficulty with human resources & labour (34% vs. 23% females) and sales & customer acquisition (16% vs. 9%).

Consider the most important aspect of running their business to be the strategy/future planning (17% vs. 9% males).

Have plans for purchasing new equipment or machinery (63% vs. 53% females) or purchase or build new commercial real estate (20% vs. 13% females).

Have the most difficulty with financing & cash flow (13% vs. 6% males) and marketing, advertising & PR (13% vs. 7% males).

“THEY ARE MORE LIKELY

TO…”

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Just how different are women and men entrepreneurs? (Summary) (cont’d)

FEMALEMALE


Plan to spend a greater portion of their capital investment in Alberta (95% vs. 88% females).

Have plans for investing in IT (46% vs. 36% males) or commercialize new products/services (38% vs. 28% males).

Have an older business (mean 25 years in operation vs. 19 years females).

Plan to spend a greater portion of their capital investment in other parts of Canada (8% vs. 3% males)

Have a business in the mature phase (22% vs. 8% females).

Have a business in the start-up (8% vs. 1% males) or initial growth phases (13% vs. 5% males).

Be in the energy or oil & gas (19% vs. 9% females) or construction (13% vs. 6% females) industries.

Be in the health care & social assistance (13% vs. 2% males) or education (6% vs. 2% males) sectors.

Be located/ have locations in a rural area (23% vs. 15% females).

Be located/ have locations in an urban area (55% vs. 45% males).

Have a store front (57% vs. 47% female). Not have a store front (53% vs. 43% males).


TO…”

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Just how different are women and men entrepreneurs? (Summary) (cont’d)

FEMALEMALE


Have annual revenues less than $1M (65% vs. 45% males).

Be younger (45% ‘18 to 44’ vs. 25% males).


TO…”

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Just how different are women and men entrepreneurs?


DEMOGRAPHICS

MALE FEMALE

Age 18 to 34 (9%)35 to 44 (16%)45 to 54 (31%)55 to 64 (31%)65 or older (13%)

18 to 34 (14%)35 to 44 (30%)45 to 54 (34%)55 to 64 (17%)65 or older (5%)

Decision maker Sole decision-maker (48%)Shared responsibility (45%)Influencer (7%)

Sole decision-maker (39%)Shared responsibility (46%)Influencer (15%)

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Just how different are women and men entrepreneurs? (cont’d) FIRMOGRAPHICS


MALE FEMALE

Number of employees 0 to 4 (43%)5 to 49 (50%)50-499 (7%)

0 to 4 (39%)5 to 49 (46%)50-499 (15%)

Number o f years in operation in Alberta 25 years (mean) 19 years (mean)

Intentionally trying to grow their business 75% 81%

Business life stage Start-up (1%)Initial growth (5%)Established (44%)Expansion (17%)Mature (22%)Winding down (11%)

Start-up (8%)Initial growth (13%)Established (44%)Expansion (22%)Mature (8%)Winding down (5%)

Have a store front Yes (57%)No (43%)

Yes (47%)No (53%)

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MALE FEMALE

Main industry (4% or greater) Retail Trade (20%)Energy or Oil & Gas (19%)Construction (13%)Manufacturing (7%)Prof, Scientific, Tech (6%)Automotive (4%)Transport & Warehouse (4%)

Retail Trade (14%)Health Care & Soc Asst (13%)Energy or Oil & Gas (9%)Prof, Scientific, Tech (8%)Construction (6%)Education (6%)Manufacturing (6%)Arts, Entertain & Rec (5%)Transport & Warehouse (5%)Hospitality/ Restaurant (4%)Wholesale Trade (4%)

Business locations Urban area (45%)Rural area (23%)Both (32%)

Urban area (56%)Rural area (15%)Both (29%)

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MALE FEMALE

Markets serviced Within Alberta (99%)Other Canada (48%)US (22%)International (12%)

Within Alberta (99%)Other Canada (55%)US (25%)International (17%)

Revenues <$250k (11%)$250k-<$500k (16%)$500k-<$1M (19%)$1M-<$3M (25%)$3M-<$10M (21%)$10M+ (10%)

<$250k (37%)$250k-<$500k (13%)$500k-<$1M (15%)$1M-<$3M (15%)$3M-<$10M (12%)$10M+ (8%)

Typical Borrowing Needs None (51%)Less than $1M (40%)$1M+ (9%)

None (57%)Less than $1M (37%)$1M+ (6%)

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APPENDIX: Firmographics & Respondent Demographics

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

Source: ATB Financial, Survey on Alberta SMEs, Mar 2014, with 300 respondents.

45%

46%

8%0 to 4 'Micro'

5 to 49 'Small'

50 to 499 'Med'

18%

13%

19%

22%

19%

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

Number of Employees

Annual Revenues 2013

Change from last quarter

89% of revenues comes from within Alberta; 7% from other parts of Canada; 2% from the US; and 2% Internationally (outside Canada/US).

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

Business FirmographicsBusiness Life Stage

PhaseIntentional

GrowthStart-up

Initial Growth

Established

Expansion

Mature

Winding Down

1%

6%

48%

18%

18%

10%

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


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Less than 5 years

6 to 10 years

11 to 15 years

16 to 20 years

Over 20 years

8%

13%

17%

14%

48%

No borrowing needs

Less than $1MM

$1 to < $3MM

$3 to < $10MM

$10MM+

Don't know/Refused

54%

34%

6%

1%

1%

4%

Business Firmographics

Source: ATB Financial, Survey on Alberta SMEs, Jan 2014, with 300 respondents.

$1MM+

8%

Borrowing Needs

# of Years in Operation

MEAN26

years


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Source: ATB Financial, Survey on Alberta SMEs, Mar 2014, with 300 respondents, responses mentioned by 4% or more are shown.

Industry

Energy/ Oil & Gas

Retail Trade

Construction

ManufacturingHealth Care & Social

AsstProf, Sci & Tech

Transp/ Warehouse

Automotive

Arts, Entertain & Rec

17%

17%

11%

7%

7%

6%

4%

4%

4%

Franchise Industry (n=32)

Retail 9

Food Services 6

Automotive 4

Health 2

Travel, Leisure & Accommodation

2

Energy/ Oil & Gas Services 1

Financial Services/ Insurance

1

Advertising & Printing 1

Non-profit 1

Other 5

11% of SMEs are

franchises


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46%

33%

21%

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



Business Location(s)

51% 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

99%

47%

21%

12%

Business Scope


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

Yes

No

56%

44%

Does your business have a store front?


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Respondent Demographics

Source: ATB Financial, Survey on Alberta SMEs, Mar 2014, with 300 respondents, responses mentioned by 3% or more are shown.

Owner/ Operator



Senior Manager or Manager

Managing Director, Senior Director or Director


Controller

Accountant

56%

19%

13%

8%

6%

4%

3%

3%

18-34

35 to 44

45 to 54

55 to 64

65+

10%

18%

34%

27%

11%

38%55+Title/ Role Age


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Male60%

Fe-male40%

37%

52%

11%

Sole decision-makerShares responsibilityInfluences decisions

Respondent Demographics


Role in Financial Decisions

Gender


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Judy DuncanDirector Marketing,B&Ag(403) [email protected]

Cody TousignantSenior Research ManagerCustomer Insights(403) [email protected]

Alberta Business Beat

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