1 alberta business beat volume 8, january 2015. 2 background and methodology
TRANSCRIPT
1
Alberta Business BeatVolume 8, January 2015
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Background and Methodology
3
Business & Agriculture
Background
• ATB Financial commissioned NRG Research Group to conduct a survey of 300 randomly selected small to medium-sized businesses (SMEs) in Alberta each quarter, beginning in Q1 2013.• The purpose of the study is to gain an understanding of the challenges faced by SMEs in Alberta, and to track confidence in the business climate in Alberta.
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Business & Agriculture
Research Objectives
• Measure business owners and managers’ perceptions of what the business climate will be like six months from now;• Determine how recent drops in the price of oil and the Canadian dollar have affected SMEs’ operations; • Understand how SMEs manage their cash flow, including what they would do with a sudden cash infusion, whether and how often they operate under a deficit; and,• Profile the firmographics as well as respondent demographics for SMEs in Alberta.
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Business & Agriculture
Methodology
Qualifying Businesses<500 employees,
<$20 million annual revenues,
must be financial decision makers or influencers• Excluded agriculture,
government, financial institutions, media, market research, PR, advertising
and communications sectors
Field dates:November 24 –
December 5, 2014
• Telephone• Approximately 3,000
businesses were contacted and 300
completed the survey• Margin of error is +/-
5.8%
Alberta SMEs
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Business & Agriculture
Although optimism about their business’ future remains relatively high, Alberta SMEs (especially those in the Energy industry) are much less confident about the future of the Alberta economy
Some Alberta SMEs are already feeling the impact of recent declines in the price of oil and value of the Canadian dollar. Impacts are both positive and negative.
42% of Alberta SMEs report having run a deficit. Of these, 41% report running a deficit on at least a quarterly basis.
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2
3
Key Insights
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The ATB Business Beat Index
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Business & Agriculture
Drop in optimism about the Alberta economy
Alberta Economy
60%will be better off or the
same
Your Company
88%will be better off or the
same
“How do you think… will be six months from now?”
Source: ATB Financial, Survey on Alberta SMEs, December 2014, n = 300.
(±) Change from last quarter
-4-28
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Business & Agriculture
Specifically in Oil & Gas/Energy industry
Alberta Economy
48%will be better off or the
same
Your Company
59%will be better off or the
same
“How do you think… will be six months from now?”
Source: ATB Financial, Survey on Alberta SMEs, December 2014, n = 32 Energy/Oil and Gas industry respondents.
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Business & Agriculture
Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 201440
45
50
55
60
65
70
75
80
70.2 69.8 69.872.3
75.173.1
70.467.5
55.4
59.8
66.2 66.868.8
70.968.6
44.5
ATB Business Index
ATB Economy Index
The ATB Business Beat Index
Data time periods: Q1 2013= Jan 2013, Q2 2013 = May 2013, Q3 2013 = Aug/Sept 2013, Q4 2013 = Dec 2013, Q1 2014= Mar 2014., Q2 2014 = June 2014, Q3 2014 = Aug, 2014; Q4 2014 = Dec 2014
Source: ATB Financial, Survey on Alberta SMEs 2013-14.
Index (0-100)
ATB Business Beat Index
Less optimistic about future performance
More optimistic about future performance
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Business & Agriculture
Q1 2013 Q2 2013 Q3 2013 Q4 2014 Q1 2014 Q2 2014 Q3 2014 Q4 201430
35
40
45
50
55
60
65
70
75
80
85
70.2 69.8
69.8
72.3 75.1
73.1 70.4 67.5
69.1
77.8 78.8
72.2
83.380.3
68.8
45.2
55.459.8
66.2 66.8 68.870.9 68.6
44.5
54.2
67.6
72.1
68.968.5
78.2
30.6
ATB Business Index
ATB Business Index (Energy)
ATB Economy Index
ATB Economy Index (Energy)
The ATB Business Beat Index - Energy
Source: ATB Financial, Survey on Alberta SMEs 2013-14.
More optimistic about future performance
Less optimistic about future performance
Index (0-100)
ATB Business Beat Index
Data time periods: Q1 2013= Jan 2013, Q2 2013 = May 2013, Q3 2013 = Aug/Sept 2013, Q4 2013 = Dec 2013, Q1 2014= Mar 2014., Q2 2014 = June 2014, Q3 2014 = Aug, 2014; Q4 2014 = Dec 2014
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Business & Agriculture
Q1 2013 Q2 2013 Q3 2013 Q4 2014 Q1 2014 Q2 2014 Q3 2014 Q4 201440
45
50
55
60
65
70
75
80
85
90
70.2
69.8 69.872.3
75.1 73.1 70.4
67.5
70.7
63.8
66.0
77.575.6
79.2
64.4
75.0
55.4
59.866.2 66.8
68.8 70.9 68.6
44.5
59.1
50.0
67.768.3
68.5
76.471.0
45.5
ATB Business Index
ATB Business Index (Retail)
ATB Economy Index
ATB Economy Index (Retail)
The ATB Business Beat Index – Retail
Source: ATB Financial, Survey on Alberta SMEs 2013-14.
More optimistic about future performance
Less optimistic about future performance
Index (0-100)
ATB Business Beat Index
Data time periods: Q1 2013= Jan 2013, Q2 2013 = May 2013, Q3 2013 = Aug/Sept 2013, Q4 2013 = Dec 2013, Q1 2014= Mar 2014., Q2 2014 = June 2014, Q3 2014 = Aug, 2014; Q4 2014 = Dec 2014
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Business & Agriculture
Q1 2013 Q2 2013 Q3 2013 Q4 2014 Q1 2014 Q2 2014 Q3 2014 Q4 201440
45
50
55
60
65
70
75
80
85
90
70.2
69.869.8
72.375.1 73.1 70.4
67.5
72.2
85.2
69.5
73.7
81.783.9
73.3
66.3
55.4
59.8
66.2
66.868.8
70.9 68.6
44.5
54.1
78.6
65.5
68.4
78.375.0
68.3
53.4
ATB Business Index
ATB Business Index (Con-struction)
ATB Economy Index
ATB Economy Index (Con-struction)
The ATB Business Beat Index - Construction
Source: ATB Financial, Survey on Alberta SMEs 2013-14.
More optimistic about future performance
Less optimistic about future performance
Index (0-100)
ATB Business Beat Index
Data time periods: Q1 2013= Jan 2013, Q2 2013 = May 2013, Q3 2013 = Aug/Sept 2013, Q4 2013 = Dec 2013, Q1 2014= Mar 2014., Q2 2014 = June 2014, Q3 2014 = Aug, 2014; Q4 2014 = Dec 2014
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Impact of Oil Prices and Canadian Dollar
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Business & Agriculture
Impact from drop in price of oil“Have your business operations been affected by the recent drops
in the price of oil?”
13%
16%
69%
2%
Yes, positiveYes, nega-tiveNoDon't know
9%
47%
44%
Energy/Oil & Gas
5%
27%
68%
Retail
23%
14%64%
Construction
Source: ATB Financial, Survey on Alberta SMEs, December 2014, n = 300.
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Business & Agriculture
How has oil price impacted?“Can you describe how your
business operations have been affected by the recent drops in the
price of oil”
Less revenue
Projects or contracts have been cancelled
Fewer customers
Customers making fewer discretionary purchases
Business has slowed down
Business is dependent on oil companies
6%
6%
8%
14%
20%
22%
Source: ATB Financial, Survey on Alberta SMEs, December 2014, n = 49 respondents affected negatively by recent drop in oil prices, responses mentioned by 6% or more are shown..
Affected Negatively(n =49)
“WE ARE A MANUFACTURER AND WE BUILD PRODUCTS FOR THE OIL INDUSTRY. WHEN OIL PRICES GO DOWN, PROJECTS ARE SHELVED THAT ARE HALFWAY INTO COMPLETION.“General Manager or Office Manager, Manufacturing, 20 years in business,5-19 employees,$3 million to less than $5 million in revenues.
“I AM NOT SEEING AS MANY HOUSING STARTS AND THE FORECAST IS TO DROP BY 30%.“Owner/Operator, Construction, 5 years in business,5-19 employees,$1 million to less than $3 million in revenues.
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Business & Agriculture
How has oil price impacted?“Can you describe how your
business operations have been affected by the recent drops in the
price of oil”
Source: ATB Financial, Survey on Alberta SMEs, December 2014, n = 39 respondents affected positively by drop in oil prices, responses mentioned by 10% or more are shown..
Spending less on operating costs
Other
Spending less on fuel
10%
18%
54%
Affected Positively(n =39)
“IT'S BEEN BETTER BECAUSE OUR GAS IS CHEAPER. IT'S BETTER FOR THE ECONOMY, PEOPLE ARE SPENDING MONEY AND GOING PLACES.”Senior Manager or Manager, Automotive, 10 years in business,5-19 employees,$500,000 to less than $1 million in revenues.
“LOWER PRICE OF OIL MAKES A BETTER PRICE FOR MY PRODUCT TO SELL, BECAUSE I SELL AN OFF-PRODUCT OF OIL.”CEO or President, Energy or Oil and Gas, 11 years in business,5-19 employees,$250,000 to less than $500,000 in revenues.
Other- Lower input costs - More interest in methods that reduce dependency on oil products (e.g., engine retrofits, alternative fuel and energy sources)- Lower cost of other petroleum products
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Business & Agriculture
7%
28%
64%
1%
Yes, posi-tiveYes, nega-tiveNo
Source: ATB Financial, Survey on Alberta SMEs, December 2014, n = 300.
“Have your business operations been affected by
the recent drops in the value of the Canadian
dollar?”
22%
34%
44%
Energy/Oil & Gas
68%
32%
Retail
2%25%
73%
Construction
Impact of drop in Canadian dollar
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Business & Agriculture
Our prices have gone up
Decreased sales
Increased costs of services
Inventory purchased in US currency
Increased cost of goods
Inventory purchased from the US
4%
8%
10%
10%
20%
41%
Source: ATB Financial, Survey on Alberta SMEs, December 2014, n = 84 respondents affected negatively by drop in value of the Canadian dollar, responses mentioned by 4% or more are shown..
“Can you describe how your business operations
have been affected by the recent drops in the value of the Canadian
dollar?”Affected Negatively(n =84)
How has dollar drop impacted?
41% of SMEs with storefronts (vs. 21% of SMEs without storefronts) have been
negatively affected by the low value of the Canadian dollar
“WE HAVE HAD TO CHANGE OUR IMPORT PRACTICES TO EXCLUDE ANYTHING FROM THE UNITED STATES, BASICALLY JUST CUT OUT ALL TRADE WITH THE U.S. BECAUSE WE CAN'T AFFORD TO.“General Manager or Office Manager, Arts, Entertainment, and Recreation, 3 years in business,1-4 employees,$500,000 to less than $1 million in revenues.
“IT'S BEEN AFFECTED BY THE FACT THAT I BUY ALL MY PRODUCTS BY CANADIAN DISTRIBUTORS IN AMERICAN DOLLARS.“Owner/Operator, Retail, 31 years in business,1-4 employees,$1 million to less than $3 million in revenues.
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Business & AgricultureSource: ATB Financial, Survey on Alberta SMEs, December 2014, n = 20 respondents affected positively by drop in value of the Canadian dollar, responses mentioned by 4% or more are shown..
“Can you describe how your business operations
have been affected by the recent drops in the value of the Canadian
dollar?”
Increased revenue due to the exchange
rate
We are paid in US Dollars
50%
50%
Affected Positively(n =20)
How has dollar drop impacted?
“INCREASE IN REVENUE SIMPLY THROUGH THE EXCHANGE RATE GAINS, BECAUSE PRIMARILY OUR BUSINESS IS DONE IN EUROS OR U.S. DOLLARS. SO, THE CANADIAN REVENUE IN BUSINESS THAT WAS IN EFFECT FROM 2 YEARS AGO IS 15 PERCENT HIGHER THAN IT IS TODAY.“CEO or President, Environmental Consulting, 15 years in business,1-4 employees,Less than $250,000 in revenues.
“WE ARE PROVIDING SERVICE TO AMERICAN AND EUROPEAN CUSTOMERS THAT PAY US IN U.S. DOLLARS.“CFO, Professional, Scientific, and Technical Services, 14 years in business,50-99 employees,$15 to 20 million in revenues.
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Cash flow
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Business & Agriculture
Pay outstanding invoices
Save it
Purchase inventory
Pay off loan debt
Invest to grow my business
4%
4%
4%
25%
54%
“Which of the following would be your top priority if your business were to
receive a cash infusion of $100,000?”
Source: ATB Financial, Survey on Alberta SMEs, December 2014, n = 300, responses mentioned by 4% or more are shown.
If you received $100,000 …
42% of SMEs that have run at a deficit would pay off loan debt (vs. 12% of SMEs that haven’t run a deficit)
62% of SMEs that haven’t run a deficit would invest to grow their business (vs. 41% of SMEs that have run a
deficit)
“WE COULD PROBABLY DROP THE PRICE OF THE PRODUCT WE ORDER IF WE BOUGHT MORE IN ONE SHOT. IF WE DID THAT, IN A SENSE IT WOULD BOOST OUR BUSINESS.“Owner/Operator, Solar Energy, 5 years in business,1-4 employees.
“MARKETING, THAT'S WHAT BRINGS IN THE MOST CASH FOR PUTTING DOWN CASH ON MY INVESTMENT.“Owner/Operator, Health Care and Social Assistance, 5 years in business,1-4 employees,Less than $250,000 in revenues.
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Business & Agriculture
29%
70%
1%
Yes
No
Don't know
“During the past 12 months, were there business growth opportunities
that you did not pursue because your business lacked the necessary
funds?”
Source: ATB Financial, Survey on Alberta SMEs, December 2014, n = 300.
34%
66%
Energy/Oil & Gas
27%
73%
Retail
25%
75%
Construction
Missed growth opportunities?
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Business & Agriculture
29%
70%
1%
Yes
No
Don't know
“During the past 12 months, were there business growth opportunities
that you did not pursue because your business lacked the necessary
funds?”
Source: ATB Financial, Survey on Alberta SMEs, December 2014, n = 300.
Missed growth opportunities?
47% of SMEs that have run at a deficit have had to pass on growth
opportunities due to a lack of funds (vs. 16% of SMEs that haven’t run a deficit)
29% of micro SMEs and 34% of medium SMEs have had to pass on growth
opportunities due to a lack of funds (vs. 8% of large SMEs)
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Business & Agriculture
Other
Diversification
Work opportunities
General expansion
Expanding product and service offerings
Purchasing new property
Advertising
Larger contracts or projects
Hiring additional employees
Purchasing more inventory
7%
5%
7%
7%
9%
11%
13%
13%
13%
22%
“What type of business growth opportunities were missed
because of funding issues?”
Source: ATB Financial, Survey on Alberta SMEs, December 2014, n = 88 respondents who missed growth opportunities because of funding issues, responses mentioned by 5% or more are shown.
What type of opportunities?
“BIGGER CONTRACTS. I CANNOT AFFORD TO HIRE MORE EMPLOYEES, I DO WHAT I CAN HANDLE BY MYSELF.“Owner/Operator, Professional, Scientific, and Technical Services, 27 years in business,1-4 employees,Less than $250,000 in revenues.
“BULK SALE OPPORTUNITIES, BECAUSE YOU HAVE TO RECOUP A CERTAIN MARGIN AND YOU GO BELOW THAT TO MAKE A PROFIT. SO, IF YOU HAD A RESERVE FUND, YOU WOULD BE ABLE TO DO THAT.“General Manager or Office Manager, Health Care and Social Assistance, 12 years in business,20-49 employees,$1 million to less than $3 million in revenues.
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Business & Agriculture
42%
57%
1%
Yes
No
Don't know
Source: ATB Financial, Survey on Alberta SMEs, December 2014, n = 300.
50%47%
3%
Energy/Oil & Gas
41%
55%
5%
Retail
45%55%
Construction
Does your business ever run a deficit?
27
Business & Agriculture
Very Rarely
Yearly
Quarterly
Monthly
37%
18%
28%
13%
Source: ATB Financial, Survey on Alberta SMEs, December 2014, n = 126 respondents whose business sometimes runs a deficit, responses mentioned by 5% or more are shown.
How often does your business run a deficit?
41% report running a deficit at least once a quarter
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Business & Agriculture
60%
37%
2%
Yes
No
Don't know
“Would you say that your business' deficit is
seasonal in nature?”
Source: ATB Financial, Survey on Alberta SMEs, December 2014, n = 126 respondents whose business sometimes runs a deficit.
56%44%
Energy/Oil & Gas
67%
33%
Retail
55%45%
Construction
Are business deficits seasonal?
29
Business & Agriculture
Don’t do anything
Infuse cash (non-specific)
Borrow money (non-specific)
Reduce staff
Take on more contracts
Borrow from within the organization
Reducing costs
Extend bill payments
Borrow from personal funds
Loan or line of credit with the bank
5%
5%
6%
6%
6%
8%
8%
8%
9%
34%
“What are your business' typical
strategies for getting through a short-term cash
crunch?”
Source: ATB Financial, Survey on Alberta SMEs, December 2014, n = 126 respondents whose business sometimes runs a deficit, responses mentioned by 5% or more are shown.
How do you get through short-term cash crunch?
“WE CATCH UP ON INTERNAL PROJECTS TO KEEP EVERYBODY EMPLOYED. WE TAKE ON PIECEMEAL JOBS, ANYTHING TO KEEP REGULAR STAFF ROLLING. THERE IS NO CAPITAL PURCHASES DONE UNTIL WE GET OUT OF THE TIGHT SPOT.“General Manager or Office Manager, Manufacturing, 20 years in business,5-19 employees,$3 million to less than $5 million in revenues.
“WE START USING PERSONAL CREDIT CARDS. WE PAY COMPANY BILLS WITH PERSONAL CREDIT CARDS.”Owner/Operator, Business Services, 25 years in business,5-19 employees,$1 million to less than $3 million in revenues.
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APPENDIX: Firmographics & Respondent Demographics
31
Business & Agriculture
55%37%
8%1 to 4 'Micro'
5 to 49 'Small'
50 to 499 'Med'
28%
18%15%
14%
15%
8% < $250k$250k-500k$500k-<$1MM$1MM-<$3MM$3MM-<$10MM$10MM+
Number of Employees
Annual Revenues 2013
Source: ATB Financial, Survey on Alberta SMEs, December 2014, n = 300.
Half of Alberta SMEs have less than 5 employees
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Business & Agriculture
Business Firmographics
Less than 6 years
6 to 10 years
11 to 15 years
16 to 20 years
Over 20 years
14%
17%
15%
13%
41%
No borrowing needs
Less than $1MM
$1 to < $3MM
$3 to < $10MM
$10MM+
Don't know/Refused
45%
43%
5%
4%
1%
3%
Borrowing Needs
# of Years in Operation
MEAN21
years
Source: ATB Financial, Survey on Alberta SMEs, December 2014, n = 300.
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Business & Agriculture
Business FirmographicsIndustry
Construction
Energy/ Oil & GasHealth Care & Social
AsstManufacturing
Retail Trade
Arts, Entertain & Rec
Prof, Sci & Tech
Transp/ Warehouse
Non-Profit
15%
11%
8%
8%
8%
5%
4%
4%
4%
Franchise Industry (n = 14)
Automotive 4
Financial Services/Insurance
3
Retail 2
Energy/Oil & Gas Services 1
Food Services 1
Other 4
5% of interviewed
SMEs are franchises
Source: ATB Financial, Survey on Alberta SMEs, December 2014, n = 300.
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Business & Agriculture
Business Firmographics
Yes
No
35%
63%
Does your business have a store front?
Business FirmographicsBusiness Life Stage
PhaseStart-up
Initial Growth
Established
Expansion
Mature
Winding Down
6%
9%
37%
23%
17%
8%
Source: ATB Financial, Survey on Alberta SMEs, December 2014, n = 300.
35
Business & Agriculture
Respondent Demographics
Owner/ Operator
Chief Executive Officer (CEO) or President
General Manager (GM) or Office Manager
Chief Financial Officer (CFO)
Managing Director, Senior Director or Director
Accountant
60%
16%
14%
6%
5%
4%
18-34
35 to 44
45 to 54
55 to 64
65+
11%
18%
29%
32%
9%
41%55+Title/ Role Age
Source: ATB Financial, Survey on Alberta SMEs, December 2014, n = 300.
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Business & Agriculture
Male61%
Fe-male39%
46%
42%
12%
Sole decision-makerShares responsibilityInfluences decisions
Respondent DemographicsRole in Financial
DecisionsGender
Source: ATB Financial, Survey on Alberta SMEs, December 2014, n = 300.
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Judy DuncanManaging Director Marketing,B&Ag(403) [email protected]
Cody TousignantSenior Research ManagerCustomer Insights(403) [email protected]