Alberta Business Beat

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Alberta Business BeatVolume 3, September/October 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 300

randomly selected small- to medium-sized businesses in Alberta each quarter, beginning in Q2-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;»Understand the impact of the June flooding for small to medium-sized

businesses; »Gauge the likelihood of their company’s future investment plans;»Determine best advice for a start-up to succeed; and,»Uncover the barriers for growth for small-sized businesses; 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:Aug 22 – Sept 4,

2013

Telephone + online option

• Over 3,000 businesses contacts

made and 300 completed the

survey• Margin of error is

+/- 5.8%

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Best advice for start-ups is to focus on getting ‘the basics’ right

Expectations for the Alberta economy are just taking off

Recovery from the flood continues, but growth plans were not affected

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2

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Key Insights

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Alberta Small Business Profile 2013

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

Of the SMEs we surveyed, half (49%) report fewer than five employees and half (49%) report 2012 earnings in excess of $1,000,000.

49%41%

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

23%

14%

14%

20%

17%

13% < $250k

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

Number of Employees

Annual Revenues 2012

Source: ATB Financial, Survey on Alberta SMEs, Jan/May/Aug-Sept 2013; 906 respondents.

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Business FirmographicsBusiness Life Stage

PhaseIntentional

GrowthStart-up

Initial Growth

Established

Expansion

Mature

Winding Down

3%

9%

46%

19%

15%

8%

Intentional Growth

Organic Growth

No Growth, but Trying

No Growth, NOT Trying

52%

14%

20%

14%

72% of SMEs are TRYING to

grow their business


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Up to 5 years

6 to 10 years

11 to 15 years

16 to 20 years

Over 20 years

11%

16%

16%

12%

45%

No borrowing needs

Less than $1MM

$1 to < $3MM

$3 to < $10MM

$10MM+

Don't know/Refused

48%

36%

5%

4%

2%

6%

Business Firmographics

$1MM+

11%

Borrowing Needs

# of Years in Operation

MEAN25

years


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Business FirmographicsIndustry

Energy/ Oil & Gas

Retail Trade

Construction

Health & Social Asst

Hospitality/ Restaurant

Transp/ Warehouse

Prof, Sci & Tech

Education

Manufacturing

Arts, Entertain & Rec

Business Srvs: Legal/Accting

16%

15%

13%

7%

6%

4%

4%

4%

3%

3%

3%

Franchise IndustryRetail 30%

Automotive 17%

Food Services 9%

Health 7%

Non-profit 7%

Travel, Leisure & Accommodation 6%

Beauty & Fitness 4%

Energy/ Oil & Gas Services 4%

Financial Services/ Insurance 3%

8% of SMEs are

franchises

Source: ATB Financial, Survey on Alberta SMEs, Jan/May/Aug-Sept 2013; 906 respondents, responses of 3% or more are shown.

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46%

24%

30%

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 the US

In international markets outside of Canada or the

US

98%

50%

20%

13%

Business Scope


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Source: ATB Financial, Survey on Alberta SMEs, Aug-Sept 2013, with 300 respondents.

Yes

No

Don't know

54%

43%

3%

Does your business have a store front?*

* asked only in Aug-Sept 2013

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Respondent Demographics

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

Chief Financial Officer (CFO)

45%

20%

14%

6%

6%

4%

3%

18-34

35 to 44

45 to 54

55 to 64

65+

12%

20%

32%

26%

9%

35%55+Title/ Role Age

Source: ATB Financial, Survey on Alberta SMEs, Jan/May/Aug-Sept 2013; 906 respondents, responses of 3% or more are shown.

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Male62%

Fe-male38%

38%

48%

14%

Sole decision-makerShares responsibilityInfluences decisions

Respondent DemographicsRole in Financial

DecisionsGender


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Best Advice for Start-up Success

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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.

Don’t rely on the governmentManage inventory and records well

Keep up to date with technology/ adapt to the timesOffer something unique with yor product or service

Have good quality productsBe honest

Focus on marketing/ advertisingFind 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 expectationDon't give up/ be positive

Work hardDon't grow too quickly/ start small

Hire and maintain good staffKeep expenses low/ no dept

Research the marketplaceKeep cash flowing/ watch cash flow carefully

Focus on employees & client satisfaction

3%3%3%3%3%3%3%

4%5%

6%6%6%

8%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.

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Reasons for Becoming an Entrepreneur

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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.

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Barriers for Growth of Small-Sized Business

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Uncovering the greatest barriers to grow for small-sized businesses

Limited product/service differentiation from competitors

Customer acquisition/ retention

Limited in-house marketing expertise

Overhead costs (rent/utilities)

Cost of labour

Difficulty finding capable management

Poor sales or weak market conditions

The need for regulatory compliance or Gov't regulations

Inadequate cash flow or poor cash flow management

Facing tough competition

Limited access to capital or additional financing

Difficulty hiring or retaining employees

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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%

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Impact of the June 2013 flood

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The impact from the flood was far reaching

say their business was negatively impacted by this event

(‘greatly/somewhat’)


Positively impacted

Not impacted

Somewhat negatively impacted

Greatly impacted (negatively)

10%

69%

17%

4%

21%

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Expected future impact on the Alberta economy is considerable

…anticipate the flooding will still be impacting the Alberta economy six months from now.


60%

17%

43%13%

25%2% Significant negative impact

Some negative impact

No impact

Positive impact

Don't know

This is the slide that contradicts the economy optimism growth. Potentially a leading question to be removed from the deck.

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Those negatively impacted felt the greatest effect on their revenues

“HOW WAS YOUR BUSINESS NEGATIVELY IMPACTED?”

Source: ATB Financial, Survey on Alberta SMEs, Aug/Sept 2013; among those negatively impacted; 64 respondents.

Expenditures

Indirect economic impact

Operationally impacted

Physically impacted

Revenues

6%

10%

16%

20%

34%

Among the 21% of businesses who were negatively impacted, 40%

experienced either a loss in revenue or had additional expenditures.

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The majority of SMEs negatively impacted expect to fully recover within six months

“IN SIX MONTHS’ TIME, DO YOU FEEL YOUR BUSINESS WILL…?”

Source: ATB Financial, Survey on Alberta SMEs, Aug/Sept 2013; among those negatively impacted; 64 respondents.

Don't know

No recovery yet

Partially recover

Fully recover

5%

9%

27%

59%

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FLOOD NEGATIVELY IMPACTED BUSINESS

FLOOD POSITIVELY IMPACTED BUSINESS

“We had massive loads of appliances going to High River and Calgary for replacement of damaged ones.

”

“There was no business because tourists couldn’t come here. The roads were closed. People where

concerned that Canmore was totally destroyed.

”Owner, Bed & Breakfast, 18 years in operation,Less than $250k in revenue.

General Manager, Family Trucking Business, 30 years in operation,$1MM to $3MM in revenue.

Source: ATB Financial, Survey on Alberta SMEs, Aug/Sept 2013; among those negatively (n=64) or positively impacted (n=29).

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Business Confidence

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A very optimistic future

Alberta Economy

87%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?”


(±) Change from last quarter

n/c+10

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Introducing the ATB Business Beat Optimism Indicators

Q1 2013 Q2 2013 Q3 201340

45

50

55

60

65

70

7570.2 69.8 69.8

70.568.8

69.5

55.4

59.8

66.2 ATB - Business Optimism IndexCFIB - Business Barometer In-dexATB - Economy Optimism Index

Data time periods: Q1 = Jan 2013, Q2 = May 2013 & Q3 = Aug 2013

Source: ATB Financial, Survey on Alberta SMEs 2013; CFIB Business Barometer Index 2013.

More optimistic about future performance

Less optimistic about future performance

Index (0-100)

ATB Business Beat Optimism and CFIB Business Barometer Indices

Retail +17.7Energy +4.4

Construction -13.1

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Shoppers show confidence in July

Source: ATB Daily Economic Comment, Todd Hirsch – Sept 24, 2013

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Oil sends sales soaring


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(Fewer) pretty pink houses for you and me


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Independent businesses feeling the joy


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Business Growth

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Intentional growth is paying off

75% of SMEs are intentionally trying

to grow their business.

Expand in foreign markets

Downsize your operations and sell assets

Purchase another company

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

7%

7%

8%

17%

18%

25%

34%

36%

59%

OVER THE NEXT 24 MONTHS, DO YOU HAVE ANY

PLANS TO…? “% YES”

57% are seeing growth in their

business as a result of their efforts.

12% are experiencing

‘organic’ growth.

Source: ATB Financial, Survey on Alberta SMEs, Aug/Sept2013, 300 respondents.

96% have not changed their

investment plans because of the flood

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Alberta Advantage

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I believe the Alberta advantage is…

18% of SME owner/operators report the rich and diverse economy


13% The oil industry

10% Lots of job opportunities

“THE STABILITY OF THE LONG TERM ECONOMIC FACTORS AROUND THE PROVINCE. WE HAVE NEVER REALLY HAD A LONG

TERM DOWNTURN IN OUR ECONOMY, SO WE HAVE ALWAYS MANAGED TO PULL OUT OF IT QUICKLY AND COME OUT ON TOP.

”Owner, Construction Company, 37 years in business,Less than $250k in revenue.

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What keeps me in Alberta is…

24% of SME owner/operators report … It is my home


14% The business opportunities

13% My family is here

“I WAS BORN AND RAISED HERE. I'M PROUD TO BE AN ALBERTAN. WE HAVE A STRONG ECONOMY AND IT'S THE BEST PLACE IN THE

WORLD TO LIVE.

”General Manager, Retail Business, 57 years in business,Undisclosed revenue.

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APPENDIX: Volume 3 - Firmographics and Respondent Demographics

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Half of Alberta SMEs earn revenues in excess of $1,00,000

Source: ATB Financial, Survey on Alberta SMEs, Aug/Sept 2013, with 300 respondents.

Of the SMEs we surveyed, nearly half report fewer than five employees, half

(53%) report earnings in excess of $1,000,000 in 2012.

47%

39%

14%0 to 4 'Micro'5 to 49 'Small'50 to 499 'Med'

25%

12%11

%19%

20%

14% < $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

2%

11%

46%

22%

11%

7%

Intentional Growth

Organic Growth

No Growth, but Trying

No Growth, NOT Trying

57%

12%

18%

13%

75% 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

12%

16%

15%

10%

47%

No borrowing needs

Less than $1MM

$1 to < $3MM

$3 to < $10MM

$10MM+

Don't know/Refused

48%

37%

6%

2%

2%

5%



$1MM+

10%

Borrowing Needs

# of Years in Operation

MEAN24

years


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Source: ATB Financial, Survey on Alberta SMEs, Aug/Sept 2013, with 300 respondents, responses mentioned by 4% or more are shown.

Industry

Retail Trade

Construction

Energy/ Oil & Gas

Hospitality/ Restaurant

Health & Social Asst

Prof, Sci & Tech

Transp/ Warehouse

Arts, Entertain & Rec

Education

Manufacturing

18%

15%

12%

5%

5%

4%

4%

4%

4%

4%

Franchise Industry (n=20)Retail 9

Non-profit 3

Automotive 2

Food Services 2

Health 1

Business Services 1

Other 2

7% of SMEs are

franchises


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“It’s something I like to do”“I know a lot about it”“Financial stability”

2% of SMEs surveyed considered themselves in the start-up stage of their business life cycle

Business FirmographicsStart-ups: what made you choose this

industry?

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43%

34%

22%

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 the US

In international markets outside of Canada or the

US

98%

50%

20%

13%

Business Scope


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Yes

No

Don't know

54%

43%

3%

Does your business have a store front?*

* New question this quarter

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Source: ATB Financial, Survey on Alberta SMEs, Aug/Sept 2013, with 300 respondents, responses mentioned by 3% or more are shown.

Owner/ Operator

General Manager (GM) or Office Manager

Chief Executive Officer (CEO) or President

Managing Director, Senior Director or Director

Senior Manager or Manager

Chief Financial Officer (CFO)

Controller

Vice President

Administrator

46%

19%

10%

6%

6%

3%

3%

3%

3%

18-34

35 to 44

45 to 54

55 to 64

65+

16%

18%

32%

27%

7%

34%55+Title/ Role Age


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Male64%

Female

36%

39%

46%

15%

Sole decision-makerShares responsibilityInfluences decisions



Role in Financial Decisions

Gender


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Wellington HolbrookExecutive Vice PresidentATB Business & Agriculture

atb.com/[email protected]

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