ATB BUSINESS BEAT:

The pulse on business in Alberta

87%76%

ExpEcT AlBErTA EcONOMY TO BE SAME Or BETTEr IN SIx MONThS

ExpEcT cOMpANY TO BE SAME Or BETTEr IN SIx MONThS

VOLUME 1, MARCH 2013

Alberta SMEs tie their success to natural resources, but despite low oil and gas prices, SMEs remain optimistic about their own success as well as the overall Alberta economy.

Seven in ten (70%) Alberta SMEs agree the price of a barrel of oil has a direct impact on their business success and nearly half (48%) would agree that the price of natural gas has an impact on their business.

More than six in ten (61%) report the overall Alberta economy is better off or the same compared to six months ago; 76% expect it to be the same or better off six months from now.

The vast majority (86%) agree their business success is tied to the Alberta economy.

More than three quarters (78%) report their company is better off or the same compared to six months ago and 87% expect it to be the same or better off six months from now.

OpTIMISM rUlES

Is the glass half full for Alberta entrepreneurs?In late January 2013, ATB surveyed randomly selected small and mid-sized enterprises (SMEs) in Alberta.

In general, SMEs make up 99.9% of the businesses in the province. Only 0.1% of all businesses in Alberta have 500 or more employees—the rest are “small” with fewer than 50 employees or “mid-sized” with 50 – 499 employees.

More than half of the SMEs we talked to have fewer than five employees and 61% reported 2012 revenue earnings of more than $500,000.

The business owner/operators told us:

they’re optimistic about their own operations and the economy in general;

they’re worried about finding and keeping skilled labour; and

where many are nearing retirement age, they are not terribly prepared with succession plans.

Read on to find out more about what Alberta entrepreneurs are thinking about.

A dAY IN ThE lIfE Of A SME OwNEr

KEY INSIGhTS

45%

14%

17%

13%

11%

1%Don’t know/

Refused

1 to 5 years

6 to 10 years

11 to 1

5 ye

ars

16 to 20 years

over

20

year

s

TrYING TO GrOw

Alberta SMEs are well established The SMEs we talked to have been in operation, on average, for 24 years. Almost

half (45%) have been in business for more than 20 years.

The majority of SMEs (59%) would describe their business as being in the “Established Phase” (39%); that is thriving companies with a loyal customer base. Those in the "Mature Phase" (20%) have stable year-over-year revenue, but as sales start to fall off, the owners are contemplating expanding or exiting.

Most Alberta SMEs are growing Almost seven in ten (69%) SMEs are trying to grow their business and half (48%)

are seeing growth in their business as a result. One in six (16%) are experiencing “organic growth” not related to any intentional effort.

Investment plans focus largely on the purchase of new equipment or machinery. Nearly two-thirds (63%) plan on purchasing new company assets in the next 24 months.

0%

5%

10%

15%

20%

25%

30%

Most Important

Most Time Spent

AdminRisk

OperationsIT

AccountingStrategy

MarketingHRSales

We asked SMEs what parts of running a business they spend the most amount of time on and what are the most important factors.

They spend the most time:

• managingtheirday-to-dayoperations(29%);

• generatingsalesandnewcustomers(21%);

• accounting(11%);

• humanresourcesandlabour(10%);

• marketing,advertisingandpublicrelations(8%);

• strategyandplanning(7%).

Identified as the most important aspects to their business are:

• salesandcustomeracquisition(30%);

• humanresourcesandlabour(16%);

• operationsmanagement(16%);

• strategyandplanning(13%);

• marketing,advertisingandpublicrelations(10%).

Are baby boomers procrastinating on succession planning?The baby boomer SMEs owners/operators are nearing retirement age. In fact, four in ten (42%) of the financial decision makers we talked to are 55 years of age or older.

Another ATB survey (ATB Customer Advisory Panel Feb 21, 2013 – Mar 7, 2013) found nearly six in ten (58%) businesses do not have a succession plan in place. And of those 55 years of age or older, almost half (48%) do not have a succession plan. Top reasons cited were: “it’s too early to plan”, “I don’t know”, “I don’t want to think about leaving” and “I don’t have time to deal with the issue”.

Are Alberta SMEs owners in denial? Creating and planning a successful transition from both a personal and business perspective can take years to develop—and taking the time to do so will maximize the value of the business.

49%26%25%18%

dIffIcUlTY wITh INfOrMATION TEchNOlOGIES

dIffIcUlTY wITh STrATEGY/plANNING

dIffIcUlTY wITh SAlES/cUSTOMEr AQUISITION

dIffIcUlTY wITh hUMAN rESOUrcES/lABOUr

OUch. MOrE dETAIlS ON ThE TOp pAIN pOINTS fOr AlBErTA SMEs

We also asked SMEs what is the most difficult areas facing their businesses today.

1) human resources and labour. This was by far the top issue. Almost half (49%) cite human resources as one of their biggest challenges. Nearly three in ten (27%) identify this as their most challenging task and another 22% as their second most difficult. specifically:

• Finding and attracting skilled labour (86%);

• Replacingkeyemployees(69%);

• ManagingGenYworkers(58%).

2) Sales and customer acquisition. Fully one quarter (26%) place sales and acquisition second among their top two most difficult challenges, including:

• Competitionfromotherbusinesseslargeorsmall(68%);

• Nearlyhalf(49%)identifiedseasonalityasbeingthemostdifficult.

3) Strategy and planning. A positive business climate poses challenges to one quarter (25%) of SMEs when it comes to managing strategy and planning for their business. These businesses report having difficulty with:

• Managinggrowthandexpansion(71%);

• Focusingtheirbusinessefforts(36%);

• Successionplanning(35%).

4) Information Technologies (hardware and software).And finally, two in ten (18%) SMEs identified having the most difficulty with IT. It turns out that an array of challenges are causing them grief. The most frequently mentioned are:

• Keepingupwithnewtechnology(75%);

• Softwareorequipmentupgrades(65%);

• DurableITorequipmentmalfunctioning(53%).

About NrG research GroupNRGResearchGroup(www.nrgresearchgroup.com)isa leading Canadian public affairs and market research company with offices in Calgary, Vancouver, and Winnipeg.

who did we talk to? These findings are from an ATB Business telephone survey conducted during January 22 to 31, 2013 with 303 randomly selected Alberta SMEs owners/operators.

Study exclusions: agriculture (farms or ranches), government, financial institutions and large businesses (500+ employees).

Business size definitions: small (0 to 49 full-time employees) and medium-sized (50 to 499 full-time employees).

The margin of error for this survey is ± 5.8%, 19 times out of 20.

cONclUSION

Alberta SMEs are optimistic, despite talk of the “bitumen bubble” and world economic challenges.

While Alberta’s population is growing quickly, outpacing the rest of Canada*, the ability to keep and retain a skilled workforce remains difficult for Alberta SMEs.

The average age of SME owner/operators in Alberta is high. Succession planning should be top of mind.

*Statistics Canada, The Daily, March 20, 2013

About This reportfor more information on this report or the next ATB Business Beat, please email businessbeat@atb.com.

About ATB financialATB Financial (atb.com) is the largest Alberta-based financial institution, with assets of $32 billion. ATB offers retail financial services, business and agricultural financial services, corporate financial services and investor services to more than 635,000 Albertans and Alberta-based businesses in 242 communities in our province.

ATB Financial Business & Agriculture provides services to Alberta’s small and mid-sized businesses, farmers and other agriculture customers.

To find out how ATB Financial can help your business grow, please contact: Wellington Holbrook, Executive Vice-President, Business & Agriculture at askwellington@atb.com.