alberta business beat

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Alberta Business BeatVolume 2, June 2013

INTERNAL with notes

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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 303

randomly selected small- to medium-sized businesses in Alberta each quarter, beginning in Q1-FY2014.• 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;»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 challenges for small- to medium-sized businesses with

finding and retaining skilled labour, the competition impacting sales and succession planning; »Determine best advice for a small- to medium-sized business to grow

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

to medium-sized businesses in Alberta.

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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:May 1-15, 2013

Telephone + online option

• Over 3,000 businesses contacts

made and 303 completed the

survey• Margin of error is

+/- 5.8%

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Key Insights

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Alberta business owners’ optimism higher than last quarter

Finding skilled labour an issue for two-thirdsOne-third plan to exit their business in the next 5 years, yet half have no formal plan

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Key Insights

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Business Confidence

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Optimistic about the future

Alberta Economy

77%will be better off or the

same

Your Company

89%will be better off or the

same

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

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

(±) Change from last quarter

+2+1

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What’s driving the optimism?

Better/Same

“WHY DO YOU THINK THE ALBERTA ECONOMY WILL BE BETTER SIX MONTHS FROM

NOW?”


Price of crude oil improving

Improving job opportunities

Sales improving

Global economy recovery

Industry is improving

9%

9%

11%

13%

36%

77%

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Business Growth

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Intentional growth is paying off

73% of SMEs are intentionally trying

to grow their business.

Purchase another company

Downsize your operations and sell assets*

Expand in foreign markets

Invest in R&D

Purchase/build commercial real estate

Commercialize new products or services

Expand in domestic markets

Invest in new IT

Purchase equipment/machinery

7%

11%

13%

16%

19%

30%

33%

35%

53%

OVER THE NEXT 24 MONTHS, DO YOU HAVE ANY

PLANS TO…? “% YES”

52% are seeing growth in their business as a result of their

efforts.

12% are experiencing

‘organic’ growth.


* New question this quarter

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3 Tips for Intentionally Growing Your Business

24% of SME owner/operators report advertising or marketing is important


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 THE 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.

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Diving Deeper into Pain Points

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Challenges Finding and Hanging on to Experienced Staff

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Jobless rate falls in April

Unemployment rate dropped to 4.4 per

cent

Nearly 15,000 new jobs

Gains in full-time positions

Source: Statistics Canada, CANSIM table 282-0087.

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Trouble finding & retaining skilled labour

23%

33%

12%

34%

Strongly Agree Column2

Difficultly finding

Difficultly retaining16%

4%

19%

9%

Column2 Strongly Disagree

67%

35%

13%

35%


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Top 5 challenges

44%

37%

20%

19%

13% Shortage of skilled labour

Salary expectations are too high

Can not compete with competition

People do not want to work

Location

TOP 5 Challenges with FINDING Skilled Labour

TOP 5 Challenges with RETAINING Skilled Labour


52%

27%

20%

13%13%

Salary expectations are too highCan not compete with competitionPeople do not want to workShortage of skilled labourPeople leave for other jobs

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TROUBLE FINDING SKILLED LABOUR

TROUBLE RETAINING SKILLED LABOUR

“I can’t afford to pay what large oilfield companies pay for salaries.

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

“They just aren’t out there. We just aren’t finding the skilled journeymen

we need.

”VP, Construction Company, 5 years in operation,$1MM-$3MM in revenue.

Owner/ Operator, Construction Company, 20 years in operation,< $250,000 in revenue.

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Succession Planning

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


< 12 mths4%

1 to 3 yrs13%

4 to 5 yrs17%

6 to 10 yrs19%

10+ yrs41%

Don’t know6%

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“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! Nearly 3 in 10 (27%) mention one of

the following reasons as to why they do NOT have a succession plan:

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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

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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”.

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Business Challenges with the Competition

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How does “the competition” impact sales & customer acquisition efforts?

Hard to compete with 'the big guys'

Product/ service competitiveness

Finding employees

Cannot compete with bigger budgets or marketing

Price competitiveness

8%

10%

12%

16%

30%


TOP 5 Challenges with either large or other Small Businesses

“YOU’VE GOT WAL-MART AND STAPLES. PRICING OF MY

PRODUCT IS A TOUGH SELL.

”Owner, IT & Computer Sales/Service, 15 years in business,< $250k in revenue.

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Conclusions

•Alberta small and mid-sized business owners remain optimistic

•Finding and retaining skilled labour remains number one pain point

• In the next 5-10 years, we’ll see significant ‘changing of the guard’ regarding ownership

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Questions?

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APPENDIX: Business Firmographics & Respondent Demographics

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

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

Of the SMEs we surveyed, nearly half report fewer than five employees, over six in ten (64%) report earnings in excess of

$500,000 in 2012.

46%

45%

10%0 to 4 'Micro'5 to 49 'Small'50 to 499 'Med'

22%

14%

16%22%

13%

13%

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

Number of Employees

Annual Revenues 2012

Change from last quarter

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Business FirmographicsBusiness Life Stage

PhaseIntentional

GrowthStart-up

Initial Growth

Established

Expansion

Mature

Winding Down

3%

7%

52%

17%

15%

6%

Intentional Growth

Organic Growth

No Growth, but Trying

No Growth, NOT Trying

52%

12%

21%

15%

73% of SMEs are TRYING to

grow their business


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1 to 5 years

6 to 10 years

11 to 15 years

16 to 20 years

Over 20 years

11%

19%

17%

12%

42%

No borrowing needs

Less than $1MM

$1 to < $3MM

$3 to < $10MM

$10MM+

Don't know/Refused

50%

35%

3%

5%

2%

7%

Business Firmographics


$1MM+

9%

Borrowing Needs

# of Years in Operation

MEAN24

years


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

Industry

Energy/ Oil & Gas

Construction

Hospitality/ Restaurant

Transp/ Warehouse

Education

Manufacturing

13%

11%

11%

11%

9%

5%

5%

4%

4%

3%

3%

Franchise Industry (n=28)Retail 8

Automotive 6

Food Services 3

Health 2

Travel, Leisure & Accommodation

2

Beauty & Fitness 1

Energy/ Oil & Gas Services 1

Child & Senior Services 1

Home Improvement Services

1

9% of SMEs are

franchises


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48%

28%

24%

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



Business Location(s)

49% of SMEs only conduct business in

Alberta

Within Alberta

In other parts of Canada

In international markets outside

of Canada

96%

48%

23%

Business Scope


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Respondent Demographics

Source: ATB Financial, Survey on Alberta SMEs, May 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

42%

22%

17%

8%

6%

3%

18-34

35 to 44

45 to 54

55 to 64

65+

10%

22%

38%

24%

6%

29%55+Title/ Role Age


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Male56%

Fe-male44%

35%

49%

16%

Sole decision-makerShares responsibilityInfluences decisions

Respondent Demographics


Role in Financial Decisions

Gender


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